Trade Creation and Trade Diversion Effects in the Eurasian Economic Union (Customs Union)

Abstract

The purpose of this paper is to study the impact of the Eurasian Economic Union on trade flows, particularly trade diversion and trade creation effects of it on trade. The research will focus on intra-bloc trade and examine the effects of trade creation and trade diversion policy variables have on trade of five member states of Eurasian Economic Union for the period of 2005-2018. We test this by applying Gravity model on bilateral export flows for five member states paired with 57 partner trade countries from the sample. We use panel year fixed effect estimation method and our results show that there Eurasian Economic Union and its predecessor Eurasian Customs Union had trade diverting effect on trade flows of member states.