Analysis of Trade Creation and Trade Diversion Effects in Regional Economic Integration: A Case Study of the North American Free Trade Area

Research Article
Open access

Analysis of Trade Creation and Trade Diversion Effects in Regional Economic Integration: A Case Study of the North American Free Trade Area

Ke Xu 1*
  • 1 The Affiliated High School of South China Normal University    
  • *corresponding author yixuanxiao958@gmail.com
LNEP Vol.97
ISSN (Print): 2753-7056
ISSN (Online): 2753-7048
ISBN (Print): 978-1-80590-137-2
ISBN (Online): 978-1-80590-138-9

Abstract

This article comprehensively reviews the impact of regional economic integration on trade creation and trade transfer, with a particular focus on the North American Free Trade Agreement (NAFTA) and the subsequent USMCA. By extensively synthesizing various existing literature materials, this study explores in depth the impact of regional economic integration on the economic development of member and non member countries. The article reveals in detail the specific manifestations of trade creation and trade transfer in agriculture and automobile manufacturing, two key industries, during different time periods. The research results indicate that NAFTA and USMCA have effectively promoted trade between these two industries within the region, but have also to some extent triggered trade diversion among non member countries. Although regional economic integration has improved the overall economic welfare level of member countries, it also faces many challenges such as decreased public support and limited policy implementation space. In the future, regional economic integration urgently needs to explore a balance between deepening internal cooperation and effectively addressing the challenges of globalization.

Keywords:

Regional Economic Integration, Free Trade Area (FTA), Trade Creation, Trade Diversion, North American Free Trade Agreement (NAFTA)

Xu,K. (2025). Analysis of Trade Creation and Trade Diversion Effects in Regional Economic Integration: A Case Study of the North American Free Trade Area. Lecture Notes in Education Psychology and Public Media,97,47-54.
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References

[1]. Baldwin, R. E., & Venables, A. J. (1995). Regional economic integration. Handbook of international economics, 3, 1597-1644.

[2]. Viner, J. (1950). The customs union issue. Stevens.

[3]. Muhammad, K., & Yucer, A. (2009). Impact of regional trade agreements: trade creation and trade diversion in Western hemisphere. Int. J. Econ, (3), 1-23.

[4]. Blecker, R. A., & Esquivel, G. (2010). NAFTA, Trade, and Development.

[5]. Marinov, E. (2014). Economic integration theories and the developing countries.

[6]. Sergeevna, T. A. (2022). The influence of the free-trade zone on the economy and relations between its member states: on the example of USMCA.

[7]. Ciuriak, Dan, and Robert Fay. "The USMCA and Mexico’s prospects under the new North American trade regime." Chapter 2 (2021): 45-66.

[8]. Zahniser, S., Angadjivand, S., Hertz, T., Kuberka, L., & Santos, A. (2015). NAFTA at 20: North America's free trade area and its impact on agriculture.

[9]. Wise, T. A. (2009). Agricultural dumping under NAFTA: Estimating the costs of US agricultural policies to Mexican producers.

[10]. Naanwaab, C. B., & Yeboah, O. A. (2012). The Impact of NAFTA on Agricultural Commodity Trade: A Partial Equilibrium Analysis.

[11]. Canis, B., Jones, V. C., & Villarreal, M. A. (2017). NAFTA and motor vehicle trade. Washington, DC: Congressional Research Service.

[12]. Carrillo, J. (2004). NAFTA: The process of regional integration of motor vehicle production. In Cars, carriers of regionalism? (pp. 104-117). London: Palgrave Macmillan UK.

[13]. Burfisher, M. E., Robinson, S., & Thierfelder, K. (2001). The impact of NAFTA on the United States. Journal of Economic perspectives, 15(1), 125-144.

[14]. Morais, A. G., & Bender, S. (2006). Trade creation and trade diversion in Mercosur and Nafta. XXXIV Encontro Nacional de Economía ANPEC, 5-8.

[15]. Arnaud, L. (2024). From NAFTA to USMCA: revisiting the market access–policy space trade-off. New Political Economy, 29(3), 356-369.


Cite this article

Xu,K. (2025). Analysis of Trade Creation and Trade Diversion Effects in Regional Economic Integration: A Case Study of the North American Free Trade Area. Lecture Notes in Education Psychology and Public Media,97,47-54.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceeding of ICGPSH 2025 Symposium: The Globalization of Connection: Language, Supply Chain, Tariff, and Trade Wars

ISBN:978-1-80590-137-2(Print) / 978-1-80590-138-9(Online)
Editor:Enrique Mallen, Canh Thien Dang
Conference date: 25 June 2025
Series: Lecture Notes in Education Psychology and Public Media
Volume number: Vol.97
ISSN:2753-7048(Print) / 2753-7056(Online)

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References

[1]. Baldwin, R. E., & Venables, A. J. (1995). Regional economic integration. Handbook of international economics, 3, 1597-1644.

[2]. Viner, J. (1950). The customs union issue. Stevens.

[3]. Muhammad, K., & Yucer, A. (2009). Impact of regional trade agreements: trade creation and trade diversion in Western hemisphere. Int. J. Econ, (3), 1-23.

[4]. Blecker, R. A., & Esquivel, G. (2010). NAFTA, Trade, and Development.

[5]. Marinov, E. (2014). Economic integration theories and the developing countries.

[6]. Sergeevna, T. A. (2022). The influence of the free-trade zone on the economy and relations between its member states: on the example of USMCA.

[7]. Ciuriak, Dan, and Robert Fay. "The USMCA and Mexico’s prospects under the new North American trade regime." Chapter 2 (2021): 45-66.

[8]. Zahniser, S., Angadjivand, S., Hertz, T., Kuberka, L., & Santos, A. (2015). NAFTA at 20: North America's free trade area and its impact on agriculture.

[9]. Wise, T. A. (2009). Agricultural dumping under NAFTA: Estimating the costs of US agricultural policies to Mexican producers.

[10]. Naanwaab, C. B., & Yeboah, O. A. (2012). The Impact of NAFTA on Agricultural Commodity Trade: A Partial Equilibrium Analysis.

[11]. Canis, B., Jones, V. C., & Villarreal, M. A. (2017). NAFTA and motor vehicle trade. Washington, DC: Congressional Research Service.

[12]. Carrillo, J. (2004). NAFTA: The process of regional integration of motor vehicle production. In Cars, carriers of regionalism? (pp. 104-117). London: Palgrave Macmillan UK.

[13]. Burfisher, M. E., Robinson, S., & Thierfelder, K. (2001). The impact of NAFTA on the United States. Journal of Economic perspectives, 15(1), 125-144.

[14]. Morais, A. G., & Bender, S. (2006). Trade creation and trade diversion in Mercosur and Nafta. XXXIV Encontro Nacional de Economía ANPEC, 5-8.

[15]. Arnaud, L. (2024). From NAFTA to USMCA: revisiting the market access–policy space trade-off. New Political Economy, 29(3), 356-369.