Discussion Paper Details

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Title: Can South-South Trade Liberalisation Stimulate North-South Trade?

Author(s): Marco Fugazza and Frédéric Robert-Nicoud

Publication Date: June 2006

Keyword(s): input-output linkages, market access, South-South trade and value chain

Programme Area(s): International Trade and Regional Economics

Abstract: This paper uses a combination of Ethier (1982) and Melitz's (2003) models to show that liberalizing trade among developing countries, so-called South-South trade, could contribute to improve the access to international markets of developing countries' would-be exporters. Lower trade barriers among developing countries has the effect of lowering the price of intermediate inputs and eventually allows exporters in those countries to serve international markets. We also compare unilateral and multilateral South-South trade liberalization and find that the latter unambiguously reduces the price of intermediates in all participating countries, whereas the former has ambiguous effects.

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Bibliographic Reference

Fugazza, M and Robert-Nicoud, F. 2006. 'Can South-South Trade Liberalisation Stimulate North-South Trade?'. London, Centre for Economic Policy Research.