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Abstract

This paper presents a baseline model that illustrates the implica- tions of Mutual Recognition Agreements (MRAs) for excluded nations. The model shows that MRAs can harm third country exports because of a trade-diversion effect. We use highly disaggregated trade data from developed and developing nations to test whether or not MRAs have a negative effect on exports from excluded nations. In particular, we focus on the impact of a North-North MRA on the South. We find empirical evidence in support of the model; the MRA between the EU and the USA has harmed exports from Canada and the group of developing countries included in the study.

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