Date

4-2009

Degree

Bachelor of Science in Economics

College

College of Economics and Management (CEM)

Adviser/Committee Chair

U-Primo E. Rodriguez

Abstract

The proliferation and advancement of regional trading agreements all around the globe have raised questions about their welfare effects to various industries. This study aimed to measure the welfare effects – trade creation and trade diversion, of regional trade agreements on the Philippine soybean industry. Specifically, this study tried to describe the performance of the Philippine soybean industry trough a trend analysis of its production, consumption and importation. It also employed a panel level gravity model in analyzing the effects of trade agreements on the industry. Finally, it discussed the extent to which regional trading arrangements were associated with the Philippine soybean sector. The Philippines is a net importer of soybeans. The country’s soybean food consumption started to exceed the production in the 1990s. Its domestic production has been continuously decreasing since 1982; whereas its food consumption of soybeans has been increasing at a significant rate per year since 1961. Consequently, its soybean importation has been increasing at a considerable rate in the last two decades. This study formulated the basic gravity model in a way that was suited in an industry level analysis. The basic model included distance and values of domestic and foreign production of soybeans. Then, it was augmented with membership variables to trade agreements (AFTA, APEC, MERCOSUR and NAFTA). By panel data estimation technique, the fixed effect and random effect model estimates were obtained. The Hausman specification technique showed that REM is the appropriate model to use. Cook-Weisberg, on the other hand, gave evidence for heteroskedasticity problem. Therefore, the FGLS estimation technique, which allows the estimation of heteroskedastic panel model, was instead used. By using a panel data of 18 soybean trading counties of the Philippines from 1986 to 2005, the study was able to show that trade arrangements in which the Philippines belongs, particularly AFTA and APEC, have positive impact or trade creation effect on the Philippine soybean industry. However, the effect of AFTA on the Philippine soybean trade is, on the average, minor compared to APEC which has significant and higher trade creation effect. The formation of NAFTA, on the other hand appeared to have had the strongest effect though Philippines is not a member of this group. The positive impacts of APEC and NAFTA can be accounted to a high trading activity of the Philippines with both trade arrangements. Moreover, the inclusion of US in both groups can also be a factor since US comprises almost three-fourths of the total soybean trade of the Philippines. Finally, MERCOSUR has a negative impact on the soybean trade of the Philippines yet its effect is relatively insignificant.

Language

English

Call Number

LG 993.5 2009 E2 J48

Document Type

Thesis

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