Regionalism and Its Effects on Iranian Agricultural Exports: The Case of Economic Cooperation Organization

Abstract

Problem statement: World economy has become increasingly integrated. There is an underlying assumption that integration into the world economy provides more opportunities for trade. The evidence shows that integration at the regional levels can help developing countries to prepare for the international economic integration. It will be important to outline and analyze past efforts at regional integration (regionalism) to have prospects for future arrangements. Approach: Therefore this study assessed the impact of Iran membership in Economic Cooperation Organization (ECO) on agricultural exports by means of generalized gravity model. The econometric method was used to isolate and eliminate the regional agreement effects is panel and pooled data techniques. Results: Our estimation results indicated positive and significant intra-trade impact of regionalism on Iranian agricultural export. Conclusion/recommendation: We had seen that, directly and indirectly, ECO could have positive effect on Iran agricultural trade. Indirectly, because similarity degree between Iran and the other ECO members in religion, border, ethnic, language and is very high in relation to the other chosen trade partners of Iran. Also a considerable share of the variability in ECO agricultural trade flows referred to uneconomic factors. Therefore, it seems that Iran would be able to expand its agricultural exports by gradually reducing trade barriers in ECO region and using of these ECO members' similarities.

Analysis of Interregional Commodity Flows

“…The fundamental concept of the gravity model is that the attraction between two objects is proportional to their mass and inversely proportional to their respective distance. Consequently, the general formulation of spatial interactions can be adapted to reflect this basic assumption to form the elementary formulation of the gravity model using impedance variables (e.g., distance, travel time, generalized cost) to describe the way in which freight demand decreases (Ogden, 1978;Toosi et al, 2009;Ardakani et al, 2009). The gravity model calibration process attempts to explore the impedance variable function as closely as possible using the observed trip length distribution (Ortuzar and Willumsen, 1994).…”