Feasibility of Trading Block Implementation: The Case of Iran and Selected Countries

Economic integration is considered as a policy by which trade barriers should be relaxed gradually or disappear fully among members of a trading block. Integration arrangements are implemented to make economic policies beneficial to members in order to strengthen their economic relations. In principle, integration refers to unified monetary, financial and trade policies that countries of an economic union have agreed upon. Applying the panel data model to the gravity theory, this paper examines the effects of trade integration on trade flows between Iran and selected economic blocks over the period of 1992-2003. The results obtained imply that trade integration between Iran and the economic blocks like the European Union (EU), PGCC, D8 and East Asian countries can lead to trade creation, while the trade intensities of the EU-Iran and East Asia-Iran are more pronounced than those of the others.