An Analysis of International Trade Networks: the Examples of Efta and Lafta
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70- 14,072 McCONNELL, James Eakin, 1937- AN ANALYSIS OF INTERNATIONAL TRADE NETWORKS: THE EXAMPLES OF EFTA AND LAFTA. The Ohio State University, Ph.D., 1969 Geography University Microfilms, Inc., Ann Arbor, Michigan THIS DISSERTATION HAS BEEN MICROFILMED EXACTLY AS RECEIVED AN ANALYSIS OF INTERNATIONAL TRADE NETWORKS: THE EXAMPLES OF EFTA AND LAFTA DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By James Eakin McConnell, 6.S., M.A. The Ohio State University 1969 Approved by Adviser Department of Geography ACKNOWLEDGEMENTS I should like to thank the members of my disserta tion committee (especially Professors Edward J. Taaffe and Howard L. Gauthier) for their helpful criticisms and sugges tions at various stages in the writing of this paper. Spe cial thanks should also be given to Mrs. Joyce Lewis for typing and proof-reading the manuscript. ii VITA June 27, 1937 Born - Grove City, Pennsylvania 1960 B.S., Slippery Rock State College Slippery Rock, Pennsylvania 1960-1961 Teaching Assistant, Department of - Geography, Miami University, Oxford, Ohio 1961 M.A., Miami University, Oxford, Ohio 1961-1962 Teaching Assistant, Department of Geography, University of Wisconsin, Madison, Wisconsin 1962-1965 Instructor and Assistant Professor, Department of Geography, Indiana University of Pennsylvania, Indiana, Pennsylvania 1965-1968 Teaching Associate, Department of Geography, Ohio State University, Columbus, Ohio 1968- Instructor, Department of Geog raphy, State University of New York, Buffalo, New York PUBLICATIONS "The Middle East: Competitive or Complementary?" Tijdschrift voor Economische enSociale Geografie, LVIII (1567), pp. 82-93. "The Impact of a Transport Linkage on the Social and Eco nomic Characteristics of Villages in Developing Areas," The Pennsylvania Geographer, forthcoming. iii "A Model for the Analysis of Commodity Specialization: The Cases of EFTA and LAFTA, 1953-1965." Proceedings, New York-New Jersey Division, Association of American Geog raphers, III (1970), forthcoming. FIELDS OF STUDY Major Field: Economic Geography Studies in International Trade Studies in Transportation TABLE OF CONTENTS Page ACKNOWLEDGEMENTS........................................ ii VITA................................................... iii LIST OF TABLES......................................... vii INTRODUCTION.......................................... 1 Chapter I. INTRODUCTION.................................. 1 Statement of Problem........................ 1 Hypotheses................... 6 II. THE PATTERNS OF VALUE T R A D E .................. 9 Review of Literature........................ 9 Geography Literature...................... 9 Economic and Political Science Literature . 13 Formulation of a Trade Model.................. 24 The Study Area..............................24 The Year.................................... 28 The Data.................................... 29 The Trade Model Construct ............... 32 Empirical Testing .......................... 57 The Effect of Integration.................... 68 Evaluation of the Models...................... 76 Conclusions.............. 81 III. ECONOMIC INTEGRATION AND THE COMPOSITION OF TRADE .......................................... 86 Introduction.................................. 86 Commodity Trade Literature: An Overview. 88 Relationship Between the Geographic Concentra tion of Trade and the Commodity Specialization of Trade...................................... 92 v TABLE OF CONTENTS--Continued Chapter Page A Model of Commodity Specialization........ 100 Purpose of the M o d e l .................... 100 A Corollary.............................. 102 The Model Construct....................... 104 Empirical Results........................ 114 Conclusions.............................. 116 Conclusions............................ 121 IV. SUMMARY.......... 125 Summary of Conclusions .................... 125 Directions for Further Research............. 133 BIBLIOGRAPHY.......................................... 137 vi LIST OF TABLES Table Page 1. Countries in the Study Area.................... 30 2. The Total Number of Country-to-Country Trade Links in 196S for each Member of EFTA and LAFTA. 34 3. Multiple Correlation Coefficients Before and After Data Transformation...................... 53 4. The Simple Correlation Coefficients (r's) for the Combined Networks.............................. 56 5. Statistical Results from the Regression Analyses 58 6. A Comparison of the Multiple Regression Coeffi cients Obtained in Four Different Studies. 61 7. Regression Results for Four Studies............ 63 2 8. Levels of R and R Before and After Preference Variables are Included in the Trade Models . 68 9. Total Value Trade and Percent of Total Union Value Trade for each Member of EFTA and LAFTA in 1965 and 1959 to Twelve World Trade Areas. 70 10. Percent Change in the Value Trade of EFTA and LAFTA To and From World Trading Areas from 1959 to 1965........................................ 74 11. The Number of Countries in each Trade Area that is Over-, or Under-, Estimated by the Flow Models for EFTA's Value Trade in 1965 (EFTA's Exports are Designated by "X," Imports by "M.")............ 77 12. The Number of Countries in each Trade Area that is Over-, or Under-, Estimated by the Flow Models for LAFTA's Value Trade in 1965 (LAFTA's Exports are Identified by "X," Imports by "M.")........ 78 vii LIST OF TABLES--Continued Table Page 13. Coefficients of Geographic Concentration for EFTA and LAFTA Export and Import Trade in 1959 and 1965............................................ 96 14. Coefficients of Commodity Specialization for EFTA and LAFTA Export and Import Trade in 1959 and 1965............................................ 97 15. Correlations Between the Coefficients of Geo graphic Concentration and Commodity Specialization of Trade for the Export and Import Trade of the Periphery in 1959 and 1965..................... 97 16. Coefficients of Export and Import Specialization: 1953, 1959, and 1965............................ 105 17. Simple Correlations for the Trade Specialization M o d e l ........................................... 112 18. Results of the Analysis of Export and Import Specialization................................... 115 19. Absolute and Net Changes in Specialization: 1953-1959, 1959-1965, and 1953-1965 ............. 118 viii CHAPTER I INTRODUCTION Statement of Problem Four years after the successful economic integration of six European countries’1, into the European Economic Commu nity (hereafter referred to as the EEC), eighteen other na- 2 tions in Europe and Latin America brought into existence the European Free Trade Association (hereafter referred to as EFTA) and the Latin American Free Trade Association 3 (hereafter referred to as LAFTA). The decision of these eighteen countries to spatially extend the integration pro cess was a means of retaliating against what they perceived The six countries of the Common Market are Belgium, France, West Germany, Italy, Luxembourg, and the Nether lands. These six countries formally initiated the European Economic Community with the Treaty of Rome in 1957. 2 The eighteen countries are Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela in Latin America; and Austria, Denmark, Fin land, Great Britain, Norway, Portugal, Sweden, and Switzer land in Europe. 3 A free trade association is a much more flexible type of economic union than is the common market. A free trade association seeks to eliminate tariffs among members of the union. A common market, in contrast, goes beyond intra-bloc cooperation and seeks to obtain a common external tariff for third parties and also to work toward the free movement of the factors of production within the bloc area. 1 to be direct economic and political threats from the EEC and from the protectionist-oriented governments of the 4 United States and Canada. Their reaction was based on cer tain assumptions typical of that expressed by the President of Uruguay in his address to a conference of Latin American countries in July, 1961. In his words: The formation of a European Common Market and EFTA constitutes a state of near war against Latin Amer ican exports. Therefore, we must reply to one in tegration with another one; to one increase of ac quisitive power by internal enrichment by another; to inter-European co-operation by inter-Latin Amer ican co-operation. The existence of EFTA and LAFTA intensified economic rival ry within the Western Hemisphere and was tantamount to the creation of a secondary force to counter-balance the inter national economic and political strength of the EEC, the United States, and Canada. During the 1950's and early 1960's, both the United States and Canada were protectionist-oriented, despite the goals of the General Agreements on Tariffs and Trade to re duce tariff barriers. By 1958, the Trade Agreements Acts had become so protectionist as to raise doubts about whether they ought to be characterized any longer as measures for reducing tariffs. See, for example: Howard S. Piquet, The United States Trade Expansion Act of 1962 (Washington: Ca- nadian-American Committee, 1963}, p. 5. Similar policies to protect against import competition were in operation within the Canadian economy as well. The threat such policies posed to the developing nations of Latin America and Western Europe regarding their ability to enter the markets