Exploring Intra-Commonwealth Goods and Services Trade

This study assembles data on bilateral goods and services trade flows for 242 countries over the period 1995–2010 and uses both descriptive statistics and sophisticated econometric techniques to understand the nature and structure of intra-Commonwealth trade, its determinants, and the trade effect of being a part of the Commonwealth. The existing econometric studies examining the trade effect of Commonwealth membership do not account for the presence of zero trade flows between bilateral trading partners, unobserved heterogeneity, endogeneity of preferential trading agreements (PTA) membership and multilateral resistance in estimation, leading to biased estimates. Our analyses are an improvement on all these fronts. The existing econometric studies only look at trade in merchandise goods, while we also include services trade in our analyses. We also assemble a much larger sample of bilateral trading partners (242 countries each) than in the existing literature. Commonwealth membership is found to increase goods exports by 14.5–33.2 per cent and services exports by 42.8 per cent in our results, ceteris paribus and on average.