Assessing the Costs of Alliance Withdrawal on Trade Determination: A Lesson from Mauritania

ABSTRACT

This paper assesses the consequences of Mauritania’s exit from the West African regional trade agreement with respect to the region and in comparison, to the general effects on the performance of trade determinants. The selected trade determinants include alliances and regional trade agreements (RTA)-which are bilateral factors envisaged to foster international trade. Using a gravity model, the paper adopts PPML vis-à-vis difference-in-impact technique to evaluate the changes in performance of trade determinants from pre-exit to post-exit periods. The magnitude of impact of RTA on trade determination is reduced upon the exit of Mauritania, prompting overall negative difference-in-impact. But similar result is not statistically significant with specific consideration of Mauritania and West African region even though the coefficients reduced in post-exit. The impact of non-reciprocal general system of preference (GSP) significantly reduced as Mauritania exited ECOWAS. It is established that not all alliances influence trade positively. Overall, military alliance produces negative difference-in-impact; imbued with mixed reactions from other variables. It is therefore affirming that the exit of an alliance and regional trade agreement would require assessing their performance relative to trade determination. Alternative negotiation for trade preference is suggested if exit is unavoidable; thereby providing meaningful and useful lesson for implementation of alliance or RTA entrance and exit.

KEYWORDS:

• Gravity
• difference-in-impact
• trade
• alliance
• preferential trade agreement
• pre-exit
• ECOWAS

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ ECOWAS countries are; Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea Bissau, Ivory Coast, Liberia, Mali, Mauritania (Member till December, 2000), Niger, Nigeria, Senegal, Sierra Leone and Togo.

² According to Center for Systemic Peace, correlate of War (COW) projects, alliances can be classified as follows: (1) Military Alliance-Also known as Type I alliance is “a defense pact and the highest level of military commitment, requiring alliance members to come to each other’s aid militarily if attacked by a third party.” (2) Non-Aggressive Alliance-Also known to be Type II alliance “pledge signatories to either remain neutral in case of conflict or to not use or otherwise support the use of force against the other alliance member.” (3) Entente-otherwise known as Type III alliance “provide for the least commitment and obligate the member to consult in times of crises or armed attack.”

³ Countries used in the research includes; Algeria, Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium-Luxembourg, Benin, Brazil, Burkina Faso, Cameroon, Canada, Cape Verde, Chad, China, Colombia, Cote d’lvoire, Cuba, Cyprus, Denmark, Egypt, Finland, France, Gambia, Germany, Ghana, Greece, Guinea, Guinea-Bissau, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kenya, Korea Republic, Lebanon, Liberia, Macao, Malawi, Malaysia, Mali, Mauritania, Mexico, Morocco, Netherlands, New Zealand, Niger, Nigeria, Norway, Pakistan, Poland, Portugal, Romania, Russia, Saudi Arabia, Senegal, Sierra Leone, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Togo, Trinidad, Turkey, UAE, Ukraine, United Kingdom, United States, Uruguay, Venezuela and Vietnam.