The Effects of Regional Trade Agreements on Portuguese Trade

The main objective of this research is to demonstrate the importance of the gravity model in explaining bilateral trade between Portugal and its fifteen main partners. The selected countries provide an idea of the international economic relations between Portugal and its main trading partners for the period 1990-2023. In this context, we formulate econometric models (Quantile Regressions, Poisson Pseudo Maximum Likelihood- PPML, and Random Effects) to test the effects of common religion, regional trade agreements, tariff rates, economies of scale, borders and geographical distance. The economies of scale and trade agreements are positively correlated with bilateral trade. Moreover, geographical distance indicates that the transport and logistics costs decrease, verifying a negative relationship between geographical distance and bilateral trade. The general border revealed that it stimulated the bilateral trade between Portugal and Spain. Subsequently, the tariff rates and their applications show decreased bilateral trade.