Size of regional trade agreements and regional trade bias

Abstract

We test the relationship between size of regional trade agreement (RTA) and regional trade bias using a gravity equation on a large sample of 143 countries for the period 1980–2003. We find that regional trade bias declines with the size of the club and that three of the four expanding RTAs have already surpassed their ‘optimal’ sizes. There is no evidence that RTAs have set protection levels against outsiders noncooperatively.