Beowulf – Defining God

BEOWULF: Defining God The epic poem of Beowulf is truly one-of-a-kind. What other old world poem can lay claim to withholding its own pagan roots and references while being transcribed by a Christian poet? Like other poems of the ‘old world', Beowulf's story has its beginnings in oral tradition. Around 850 AD the stories were culminated and written down in the Anglo-Saxon language of the time by a Christian poet. The poet doesn't let the fact that they were Christian severely affect the poem either. That does not mean that his opinions are kept quiet. There are plenty of references to the Christian God throughout the entire poem. It makes you wonder exactly how many different ways can someone refer to â€Å"Almighty God†[1314]. And let us not forget the ubiquitous Bible lesson; â€Å"And from Cain there sprang misbegotten spirits, among them Grendel, the banished and accursed†[1265-1266]. But our poet does not loose sight that these people are pagans with this reference; â€Å"†¦ s he advanced, hurrying to address the Prince of Ingwins†[1318-1319]. Ingwins are the friends/worshipers of the god Ing; in other words the Danes of this poem. Being pagan, they are also unaware of the origins of the ‘misbegotten' as noted when Hrothgar says: â€Å"They are fatherless creatures, and their whole ancestry is hidden in a past of demons and ghosts† [1355-1356]. Give credit where credit is due, the poet remained true to both religions without compensati ng for the other; â€Å"praise God†1398. OK, which one?

Is racism still in football?

A lot of people would argue that racism is still around, no matter how much we try to kick it out and especially in Football. Kick it out is a campaign designated purely to stamp out racism in Football. It works throughout the football, educational and community sectors to challenge discrimination and encourage inclusive practices and work for positive change. However after recent events going back a few years racism is still a main part of the football world although most people try to hide the fact that this is happening a lot of others are disappointed and frustrated that this still goes on. â€Å"To any governing body that turns a blind eye, I want to tell you that your attitude only magnifies the fact you are out of touch with the modern game† a strong statement made by Sepp Blatter president of FIFA (The International Federation of Association Football) to suggest that people must speak up, otherwise this problem may never be solved. On speaking about recent events that have caught eye of the public audience’s I’m going to speak on two talented footballers who are generally known around the world; Luis Suarez Captain of Uruguay and an extremely talented footballer who wears the number 7 jersey for Liverpool FC and John Terry, previous England captain and captain for Chelsea FC, both have been in the limelight regarding racial allegations. After being found guilty for misconduct regarding using insulting and potentially racist words towards Patrice Evra of Manchester United, Luis Suarez was banned for eight games and fined ?40,000. The allegations on October 15th during a fixture between Liverpool and Manchester United, during which Evra claimed that Suarez racially abused him â€Å"more than 10 times† (Guardian, 2011) Recently, incidents of racism have been blown out of proportion. Main man for Chelsea and England leader John Terry has been in the public eye following an occurrence that took place December of 2011 between himself and Anton Ferdinand, brother of England’s Rio Ferdinand. John Terry has been accused of racial abuse and has been found guilty on the 27th of July 2012. â€Å"The verdict released by the FA said: â€Å"The Football Association charged Mr Terry on Friday 27 July 2012 with using abusive and/or insulting words and/or behaviour towards Queens Park Rangers' Anton Ferdinand and which included a reference to colour and/or race contrary to FA Rule E3 [2] in relation to the Queens Park Rangers FC versus Chelsea FC fixture at Loftus Road on 23 October 2011. (BBC Sport, September, 2012) Sky Sports are one of the most sports oriented television channels in the UK and I will be assigning my media interest about how they reflect on the racism in the football world, more so in the United Kingdom. For my second week I had to identify, justify and develop an answerable research question Because I decided to focus my media interest on how sky sports deal with the issue that has affected a lot of people in football, this issue being racism, it’s no surprise that my research question will be of the same topic. To begin with I had to do some research to see if the question I’m asking would be suitable and answered by the right audience. However before I reached that stage I needed to find the correct people I’m aiming this question to. So I went and rushed to the nearest shopping centre and asked a lot of local men, there ages ranging 18-24. 17 out of 20 young males identified themselves as regular Football viewers and also check Sky Sports to catch up on the latest. Research Question: How do Sky Sports report racism in Football? Object of Study: In this subject I will be discussing how exactly Sky Sports report the racism that has been going on in recent events going back a few months to the Euro Cup where football players stated ‘if someone throws a banana at me I will go to jail, because I will kill them’ (Mario Balotelli, Sky Sports news) Sky Sports, like any other News Industry contain a lot of facts and gossip. In order to get information from my ‘object of study’ I have decided that I would visit Birmingham City Football club and speak to two young men who play for the clubs reserve squad, I asked them How Sky Sports reports racism and how the audience may respond to them? 8 year old Nathan told me that he had gone through some racial abuse early on in his career ‘I would never get picked for teams, players would never pass me the ball and most likely hear some racial abuse from fans but I believe it made me a better player now’ and 19 year old Jermain told me ‘whether Sky S ports sponge the racism issue these days to get more viewers or not, at least there putting the issue out there more so everybody can see what goes on. However I still needed to ground my question and make it more local, I could only come to a conclusion and make it based more in the UK, ‘How do Sky Sports report football racism in the UK?. Sky Sports covers most of England NI and Wales this could already suggest that all there reports covers only the United Kingdom. In my third week, for my third assignment I’ve had to amend my question and look at something that in my eyes had all the possible attributes to fit that week’s task. I have decided to use the new Guinness advert to show how rhetorical and also semiological analysis are both being used. Directed by Peter Thwaites from Gorgeous, the film was shot on location in South Africa in both Johannesburg and along the Durban coastline. The advert conveys the metaphor amazing things can happen when we challenge ourselves. (Creative report, 2012) The advert in the viewer’s judgments if never seen before can leave them guessing what it is leading to as it did me the first time I watched it. However, I looked back at it a few times and came across a number of key factors that actually do make sense and can relate to the pint of Guinness they are so discreetly advertising. ‘A cloud came from the sea’ the idea here, this could suggest, is that the cloud represents the typical Guinness drinker – someone who has broken away from the masses to find their own path. In a way using a cloud to represent liquid refreshment is very clever and in its own way. â€Å"The cloud came from the sea. He was not like other clouds. The wind could not come on him. The more he saw, the more he did. And the more he did, the more he became. You see he wasn’t just a cloud. He was a cloud made of more† the dialogue is very intriguing and it’s what draws us closer to the advertisement. As the film progresses, the cloud engages with people, places and objects below, seeing itself reflected in a mirrored skyscraper, darkening as it approaches the scene of a fierce industrial fire before the dramatic climax. The cloud then gently drifts back, ocean-bound, and gradually merges into a swirling pint of Guinness, before resolving with the new pint; Guinness. Made of More. Speaking more about the fire scene, in actual essence the cloud does represent a lot more. I believe that the fire represents a man’s rage and the cloud puts out the fire suggesting that if you have a pint of Guinness you’ll be relaxed and cooler. After reviewing this advert I’ve come to a conclusion, it’s just a major metaphor to show the amazing things that can happen when we challenge ourselves to make the most of who we are. Do we settle for the way things are or do we take the bold choice to step up and be made of more? Do we settle for an ordinary drink or do we choose one that is made of more? † Now for my fourth week I decided to focus my task on a new topic, purely because I needed a diverse audience there’s not much diversity in Football between Male and Females. How do audiences get entertainment from watching music videos on YouTube? YouTube provides a venue for sharing videos among friends and family as well as a showcase for new and experienced videographers. Featuring videos it considers entertaining, YouTube has become a destination for ambitious videographers, as well as amateurs who fancy making a statement of some kind. In addition, YouTube emerged as a major venue for excerpts from political speeches (PC Magazine) To find out a suitable answer for my question I had to obviously ask some people and see what their response on the subject is. The 3 people I decided to interview were: 21 year old musician Jamal, 23 year old Producer Michael and 19 year old dancer Emma. All of these people where happy for me to ask them anything as long as it suited the subject. Jamal told me he watched YouTube at least three times a day just too see if he can find inspiration and sometimes check out the competition. ‘YouTube is a massive platform for everybody to show off their skills, I have to see what everyone is bringing to the table to know what kind of stuff I want to bring out, and sometimes find some inspiration’. Michael however wasn’t so bitter and loves watching other musicians and producers on YouTube. ‘I love YouTube, I love everything about it. It’s like travelling the world to see what talents others have but you can do it all in your room if you know what I mean. I watch YouTube every night, sometimes because I’m bored but most of the time for entertainments, it’s like how can anybody get bored of YouTube’. I asked him if he’s ever uploaded anything on YouTube and how that’s affected him ‘Yes, I upload my beats and samples and most of the times I get people messaging me and asking me to make them an instrumental, so it does take most of my time’. To conclude my interview I went over to speak to 19 year old dancer Emma, she told me that if it had not been for YouTube maybe she would have been a nurse. I was studying health and social care in secondary school till I got all obsessed with dancing, so literally every night after school id rush home to watch some magnificent dancers on YouTube. It was like a form of relaxation, I loved it, there were some nights I wouldn’t sleep id just be up all night watching amazing dancers. This was the main factor which made me change my mind in becoming a dancer. As far as entertainment goes, I believe YouTube is the main entertainment site to date for anyone. McQuail – ‘duality of audiences’ is largely used when I was interviewing each one of these people because it gave them sense of equality the way they so passionately spoke about the subject. By reading Stuarts Halls encoding and decoding essay ive come to realise that The terms encoding and decoding are often used in reference to the processes of analog-to-digital conversion and digital-to-analog conversion. In this sense, these terms can apply to any form of data, including text, images, audio, video, multimedia, computer programs, or signals in sensors, telemetry, and control systems. Encoding should not be confused with encryption, a process in which data is deliberately altered so as to conceal its content. Encryption can be done without changing the particular code that the content is in, and encoding can be done without deliberately concealing the content. (Search network, encoding decoding, Stuart Hall) Hall himself referred to several ‘linked but distinctive moments – production, circulation, distribution/consumption, reproduction' (Hall 1980, 128)

How would you assess the nature of public history in the digital age Essay

How would you assess the nature of public history in the digital age - Essay Example It describes how digital age has influenced the discipline of history. Furthermore, the essay also narrates about how historical practices are conducted in present days’ digital age. Public history is anything, which includes the extensive public participation in the formation, recording and explanation of history. It comprises the tasks conducted by expert historians, but positively involves with many people, rather than single individuals. By itself, public history is subjected to the services of varieties of experts who perform in wider historical setups, such as individuals performing in documentations, galleries, museums, heritage sites, country houses and public libraries. Public history frequently entails demonstration of research findings in different formats in order to print for exhibitions, photographic, film displays and dramatic representations. Public history is a trimmer, adaptable to multiple contexts and audiences. Politicians advocate that public history is such work, which is involved with national community and inspire senses of individuality, unity and nationality (Willinsky, 2005). Public historians appeared around the beginning of the ‘age of commemoration’. Public historians accept various ways in which public is involved in the history. In various fields of education, politics and entertainment, it can be observed that historians involve in history practices, with or without academic directives. The discipline of public history is therefore based on the role of history and historians in the world. Public history is thus aimed to prepare individuals for better interpreter and overseer of history. The fundamental belief of public history is that historians as experts do not possess the exclusive authority to that past, but desire to involve in the discussion with the experiences and explanations of the public. Traditionally, the work of public historians was

Mid-term essay Example | Topics and Well Written Essays - 1000 words - 4

Mid-term - Essay Example Kant disagrees with the principle of utility when he argues that we should instead have indirect moral obligations in treatment of animals. Kant views animals as beings that lack independent rational wills and therefore human beings do not have any moral obligation to animals since they lack the condition of being considered as objects of obligation (Altman 20). Kant’s view when we mistreat animals is that we wrong ourselves but not violating the animal rights and therefore violating the principle of utility which in this case, will consider those who mistreats animals as wrong since their actions delivers pain to the mistreated animals. For example, If somebody shoots his or her dog because it no longer gives service, he or she does not fail in his duty to that dog because the dog is an irrational being which cannot judge, however, the one who does that acts in an inhuman way and damages that humanity that is in himself or herself that is ought to be shown towards humankind. Utilitarianism accounts for both human and nonhuman rights. The basic principle of utility has a moral consideration of animal rights and therefore animals ought to be treated the same way as human beings. The principle of utility implies that animals should be treated well in order to produce happiness for the animals. If you chop off the head of a donkey you have done wrong to the donkey itself and if you allow it to rest you give that animal the pleasure it deserves. Utilitarianism accounts for equal moral concern to human and nonhuman beings which mean killing an animal for other reasons other than food is wrong, bullfighting and even using animals for medical experimentations is unjustifiable. Kant argues that the fact that rational beings ought to have indirect moral obligation on animals has been pointed out in his arguments (Altman 23). Animals do not have the rational capacities that are considered by Kant to constitute humanity. Animals are considered to have the same

Reflective account Essay Example | Topics and Well Written Essays - 1500 words

Reflective account - Essay Example ics such as technology and labour, sustainability, human resource management, strategy, operations management, just to mention but a few that fall under the global business concept. However, in this reflective paper; we will delve into details on human resource management. This paper will discuss in details the key principles of human resource management, its significance and relevance to the global business world as well as connect it with other topics that fall and the global business concept. According to Patrick (2012), Human resource management or simply HR is a function of the organization that is designed to maximize the performance of employees and the achievement of employer strategic objectives. Human resource is particularly concerned about how the organization will manage people in the organization and focuses on policies and systems. The department usually has a number of roles and tasks that they fulfil; these functions include the following: Recruitment, this is the intake of new staff into the organization. The human resource department ensures that only qualified individuals get into the organization and at the same time ensuring that the organization does not suffer due to lack of personnel. HR is also tasked with the training and development responsibility. They will ensure that employees meet the demands of the workplace environment by organizing seminars, in-house training, and educational classes also conducted. The human resource department works clos ely with the industrial relations of the organization. They aim at balancing the organization’s practices with the requirements that arise from collective bargaining and public law (Patrick, 2012). The department may also be tasked with the role of ensuring that the workplace is safe for the employees. It does this by making sure that the company conducts its activities in line with the work safety standards. Lastly, the Human Resource department is tasked with the role of enforcing and making

Business Decision Making Assignment Example | Topics and Well Written Essays - 2500 words

Business Decision Making - Assignment Example The profitability index (PI); and iv. The payback period Lambert currently has a choice of investing in either of three machines – Alumier which is a replacement for the current machine, Big EZ – which is supplied by an American firm, and Cial which is manufactured in Japan. The objective of performing an evaluation is to determine which of these three investment options will provide the best return to the shareholders of the firm. The Net Present Value (NPV) According to Ryan and Ryan (2002) the NPV is one of the most preferred investment appraisal techniques. This method strongly rivals the IRR as one of the most popular investment appraisal techniques. In fact, Campbell and Brown (2003) indicates that it performs better than IRR in relation to making choices between mutually exclusive projects but needs to be modified in capital rationing decisions and when project choices have unequal lives. Additionally, where projects are not divisible under capital rationing it m ay be best to invest in several small projects which exhaust the budget but have lower profitability ratios and generates a higher NPV when added together rather than a large project with a higher profitability which does not exhaust the budget (Campbell and Brown 2003). ... formula for calculating NPV is as follows: NPV = CF0 + ((CF1/(1 + IRR)1) + ((CF2/(1 + IRR)2) †¦ ((CFn/(1 + IRR)n) The decision rule criteria indicate that projects with a positive NPV should be accepted. In the case of mutually exclusive projects, the project with the highest NPV value should be selected. Information on the NPV for the three investment options are shown in Table 1 in Appendix 1. The information in Table 1 indicates that the Alumier Machine and the Cial Machine will both yield a positive NPV. However, only one machine is required and so the two investments are mutually exclusive. Therefore, the machine with the highest NPV value should be chosen. The Alumier Machine will yield an NPV of ?32,180 compared to ?65,650 for the Cial Machine. The Internal Rate of Return (IRR) The IRR is another very popular and well recognized investment evaluation technique which along with NPV is rated above the other techniques (Titman et al 2011). It is the discount rate that yields an NPV of zero (Titman et al 2011). The IRR decision rule criterion is to invest in the project if the IRR is greater than the discount rate used in calculating the NPV. One of the most common problem that has been raised about the IRR is the possibility of multiple internal rates which conflict with each other or the possibility of none at all (Hazen 2003). The formula for calculating IRR which is similar to that used in calculating NPV and is given as: NPV = CF0 + ((CF1/(1 + IRR)1) + ((CF2/(1 + IRR)2) †¦ ((CFn/(1 + IRR)n) = 0 This formula is used to find the rate of return where NPV = 0. The information relating to IRR for the three investment options are shown in Table 2 in Appendix 1. The information in Table 2 indicates that the IRR for the Alumier and the Cial Machines are higher than

Suprematism, Constructivism and De Stijl Essay Example | Topics and Well Written Essays - 500 words

Suprematism, Constructivism and De Stijl - Essay Example The abstract arts: Suprematism and Constructivism developed in Russia while De Stijl developed in Holland. They all developed at the beginning of the 21st century. From 1917, the Bolshek revolution led to the blooming of the modernist styles. Suprematism developed as a spiritual freedom art that did not present art as a representation of material actual objects but as an emotional, inner feeling of one’s imagination that evoked meditation. It utilized the use of color, brush strokes and visual rhythm to engage spirituality. Kasimir Malevich founded the non-objective art in 1913. Malevich believed that the supreme reality of art was to liberate from the representational world and evoke ‘pure feeling.’ Bothe Malevich and Lissitzky believed that art could be used as an agent of change, and this was specified to societal change in Constructivism. Constructivism on the other hand developed when Russians faced many social and political injustices and there was need for art not to represent existing objects, but to address the needs of the people. It revolutionized art from’ art for art’s sake’ to ‘art for the society.’ Art in this style has addressed the needs of the society, and has influenced the modern world on political, social and architectural realms. El Lissitzky, a Russian, contributed to this artistic revolution by developing constructivism. The art form, as Suprematism, used similar geometric language but abandoned the mystical vision that favored its ‘socialism of vision.’ It was a Utopian projection.

How does faulkner portray the south book as i lay dying Essay

How does faulkner portray the south book as i lay dying - Essay Example In this novel, â€Å"William Faulkner portrays all of his themes in the actual human drama of the South† (Faulkner) the lack of communication, the poverty; ignorance and alienation are clearly engrained in the fabric of â€Å"As I Lay Dying.† Throughout the novel, the theme of lack of communication and alienations are the key factors for each and every character. The very nature of existing side by side with people is to communicate with each other for a better understanding. Lack of communication is one of the most common universal problems shown in As I Lay Dying. In the novel the characters methods of communicating with each other are many and vary. In most cases it depends on the characters relationships with one another. The characters do not communicate effectively with one another which lead to many confusion heartache and alienation. In the novel, the characters don’t always communicate with words, but they sometimes communicate through unspoken words. The communication between Dewey and Darl is often unspoken yet powerful. Yet part of Dewey Dell hates for this closeness: "And thats why I can talk to him with knowing with hating because he knows" (Faulkner 23). Darl feels that the words which he speaks, an d yet words, his words, can be seen as â€Å"†¦just a shape to fill a lack†¦Ã¢â‚¬  (Faulkner 172) with the lack of communications, the characters can only guess at the motivations, beliefs, and feelings of others. This results in misunderstandings and alienation with each other. As a result of this communication gap, the Bundren family lives an alienated life from each other. In his interview in 1959 Faulkner said about his character, "His tragedy is the impossibility-or at least the tremendous difficulty-of communication. But man keeps on trying endlessly to express himself and make contact with other human beings" (Faulkner). In the novel, Faulkner depicts the harsh reality of living in the south with empathy and grace but,

Sample Company’s Challenge Essay Example for Free

Sample Company’s Challenge Essay Sample Company has offices in Sacramento, New York, Chicago, Atlanta, Dallas and is currently working on a IPv4 infrastructure which poses a problem with future business operations. By the end of 2011, there will be no more IPv4 addresses. New customers and Internet traffic will be using the next-generation protocol: IPv6. The accelerating growth of the Internet presents powerful opportunities to transform the way we work, live, play, and learn. † (The Internet is in Transition, 2011). Do you want to be on the cutting edge of Internet possibilities or still working on the old IPv4 platform? ABC, Inc. s Solution: To successfully convert your company from an IPv4 to IPv6 platform. This business proposal will explain the advantages of a TCP/IP IPv6 infrastructure and how it will help to improve business operations. Now is the time to plan for this critical transition! Below, I will explain the numerous advantages of IPv6 over IPv4. In analyzing your company’s size and sales figures, I have noticed that there are 3,586 companies in the USA within your same industry and you operate smaller than average in annual business sales, number of employees, and revenue per employee but rank average for the amount of years in business. So you ask, why bother transitioning to IPv6 when we are a much smaller business than the average business in this industry? Do we really need to? The answer is yes and the reasons why are explained below. IPv6 Provides More Addresses: Most industries rely on the Internet and have seen significant gains in production and operations from this technology. Suppliers, customers, vendors, etc. use the Internet for orders, supply tracking, etc. The internet now plays a crucial role in most companies operations. While IPv4 has worked well for us for many years, the problem now lies in space exhaustion. It is estimated that IPv4 can only address 4 billion IP addresses. IPv4 is the protocol that provides these IP addresses which are like phone numbers or a home address that describes the physical location of the node or computer so that they may communicate with the Internet. The advantage of IPv6 is that it will use 128 bit addresses instead of the 32 bit addresses that IPv4 currently uses which caps us at the roughly 4 billion maximum addresses available. This means, there will virtually be enough addresses on IPv6 to address almost every device the particular network is utilizing. Therefore, when IPv6 increases the size and range of devices connected to the Internet, the benefit of the network effect will increase as well. â€Å"To provide equal opportunities worldwide, the Internet architecture must cope with rapid growth in consumer interest and usage. The forecast for growth leads to a new perspective on the demand for IP address space. Even without taking into consideration expected address allocation inefficiencies, IPv4’s 32-bit address space is inadequate to support a plethora of connected devices owned by one-third of Earth’s population. (Grossetete, Popoviciu, Wettling, 2008). IPv6 Security Advantages: Another advantage of IPv6 over IPv4 is security. IPv4 offers an optional IP security where IPv6 has it already built in. â€Å"IPv6 ensures that there are end-to-end security mechanisms that will provide authentication and encryption abilities to all applications and thereby eliminates the need for applications themselves to have integrated support for such abilities. The added benefit of using the same security mechanisms for all applications is that setting up and administering security policies becomes a lot simpler. IPv6 allows for complete end-to-end security thereby allowing for a new set of personalized services to be deployed such as mobile e-commerce services that rely on secure transactions. TCP/IP networks that are utilizing IPv4 are dealing with a host of issues encompassing security† (Das, K. 2011). In today’s Internet world, IPv4 platform security issues exist like connection hijacking, IP spoofing, and packet sniffing. There are not always solutions to these problems and if attempted solutions exist, they are usually at the Application level which creates a problem because they re not always operational between different applications or networks. While IPv6 is not a solution to all possible attacks and situations, it does address many lower level attacks which accounts for the majority of attacks on the average network. IPv6 and WANs: Your company has offices all over the nation which means you are utilizing a WAN or wide area network. IPv6 will work even better with WAN’s because â€Å"The expansion of the Internet is also tied to the rapid development and market penetration of enabling technologies such as high-speed broadband and wireless access. Many enterprises have shifted from point-to-point, ATM, and Frame Relay infrastructures to IP-based local- and wide-area networks (LAN and WAN) for basic business operations. Traditional voice carriers are migrating their voice network to IP-based transport to reduce or eliminate future capital expenditure (CAPEX) and operational expenditure (OPEX) related to redundant parallel network infrastructures. These IP-based technologies modify an application’s landscape by changing the use of the Internet from a client/server model to a more distributed model or peer-to-peer model. Very rapid and successful adoption of distributed applications such as Voice over Internet (VoIP), instant messaging, content sharing, and Internet gaming leads people with â€Å"always-on† and â€Å"always best† access to the Internet to be content producers as well as consumers. An expanded IP address space is necessary to support this paradigm change in the way the Internet is used† (Grossetete, Popoviciu, Wettling, 2008). IPV6 and VPN’s: Another advantage of IPv6 over IPv4 is the benefits it offers associated with VPN’s or virtual private networks. If you plan to implement a VPN or are currently running one, IPv6 will present new advantages. For example, in IPv6 it will be easier to implement a VPN because of the headers. IPv4 does not allow for multiple headers which creates a problem of compatibility within the firewalls of different vendors. IPv6 allows for multiple headers and eliminates this problem. Simply stated, this leads to faster routing. IPv6 and Networking: IPv6 creates a new platform that the Internet can operate on makes for the atmosphere of growth. One of the biggest advantages is the change from peer to peer networking to end to end networking. Peer to peer networking examples are VOiP, online video gaming, online video-conferencing etc. End to end networking allows for a group of computers to talk to each other without the need for process through a server first. That is a huge advantage! IPv6 and Better Node Configurations: Next, IPv6 trumps IPv4 because of node configurations. Every piece of equipment attached to a network must be configured properly and now it will be easier than ever with IPv6. This is because IPv6 offers automatic configuration versus the stateful configuration needed for IPv4. What does this mean you ask? It means that, â€Å"In stateless auto configuration, a host can automatically configure its own IPv6 address and does not need any assistance from a stateful address server. Entire IPv6 prefixes rather than just an address are delivered to a device. This particular feature enables routers to easily auto configure their interfaces and can be used very effectively in broadband access networks to dynamically provide customer gateways† (www. IPv6. com, 2011). IPv6 and the ease of administration: Another great advantage of IPv6 over IPv4 is the ease of administration. In IPV4, any new addressing must be done manually whenever there is a change to the network. With IPv6, you can now have numbering done automatically which makes for easier transitions in network changes of any sort. As you can see, the advantages of IPv6 over IPv4 are numerous. While there is much skepticism on how the transition with be costly and burdensome, it has actually been implemented already in various parts of the world. The earlier you start, the better off you will be should there be any kinds to iron out. This has to be a thoroughly planned event and takes time to changeover. IPv6 creates a new world of internet functionality and growth. Your business can flourish with the advantages of IPv6. As with any new technology, the price is typically higher in the beginning but the long run, you save money because your company is more efficient thus more profitable! â€Å"The improvement in network reliability would build the confidence of both enterprise and individual users in the integrity of network transactions. That would certainly yield high returns. † (IPv6: Its time, 2003).

Difference Between Sephardic and Ashkenazi Jews in Modern Times Essay Example for Free

Difference Between Sephardic and Ashkenazi Jews in Modern Times Essay For the most part, modern Jewish history deals with the political, social and economic advancements achieved by the Ashkenazi communities in Europe, America, and later Palestine. Because of its relatively small size and involvement in the affairs of civilized countries of Europe and America, the Sephardi branch of Judaism is rerely dealt with in the context of modern Jewish history. Their development is however, though not as influential upon the flow of the mainstream history as that of the Ashkenazi jewry, is nevertheless an area of interest to anyone undertaking a serious study of Jewish history. The theological difference between the two movements, the Sefardi and the Ashekenazi, lies in the traditional laws more than in written ones. Both take an Orthodoxal approach to the written law of the Torah, and the differences in its interpretation are subtle enough to be dismissed. However the traditions acquired , and at times given the power of laws, in the course of the long centuries of diaspora differ considerably from one branch of Judaism to another. Just as the worldwide language of the Ashekenazim, Yiddish, is a mixture of Hebrew with German, the common language used by the Sephardim Ladino, still in use in some parts of the world, is a dialect formed by combining Hebrew with Spanish. The Sephardim who have historically been more involved into the lives of the gentile societies where they settled dont have as strict a set of observances as do the Ashkenazis who have been contained in closed ghettos up until two centuries ago. The official doctrine of the Sephardis does not for example prohibit polygomy, whereas it hasnt been allowed in the Ashkenazi law since Middle Ages. Although the Ashkenazi traditions are somewhat stricter than those of the Sephardim, a greater percentage of Ashkenazi Jews have over the past century and a half stopped observing these traditions, becoming either secular Jews, atheists, like the American Freethinkers, or simply converting. An even greater part have chosen to follow only a part of the traditional, or oral, laws, forming widely popular Reform and Conservative movements. This phenomenon, if present within the Sephardic community exists on such a small scale that it can be discounted. The reason for this difference in the adherence of the tradition is the way in which the tradition itself was first put into effect. In the case of the Ashkenazi Jews the traditions have been instated by the long centuries of enforced separation, and when the barriers were let down, the communities that were held together by pressure from the outside started to degenerate. With the walls of the ghetto gone, but full emancipation not yet granted, many believed that if they had integrated themselves into the gentile societies, they would gain acceptance. Secular education replaced religion, rather than complementing it. This however was not the case with Sephardim, whose less strict traditions were developed in the environment of toleration. While the Ashkenazi Jews were restricted to the ghettos of Europe, held at bay by the Catholic church, the Sephardim of Middle East, North Africa and Ottoman Empire were living as dhimmies, or people of the pact, and though not fully equal with their Muslim hosts, were to some extent intregrated into their societies. For this reason, the traditional laws of the Sephardim are less demanding, but more enduring. Unlike the Ashkenazi population that has over a century of immigration spread itself all over the world, The Sephardic communities tend to concentrate mostly around a few areas. Today most of the Sephardic Jews reside within Israel, amost other Middle-Eastern communities having been reduced to virtual nonexistance by the migration of Jews out of Arabic countries after the creation of Israel. A substantial community is still maintained in Turkey, where historically Jews have received good treatment. Of the Western countries, the only one where the population of Sephardic Jews is comparable to that of the Ashekenazis is France, where a considerable number of Jews have resided since the Middle Ages. While Sephardi Jews were the first people of Jewish faith to arrive in the US, and their number in this country is still quite large, they are but a drop in the bucket when compared to the overall number of Jews currently residing in America today. The Spehardic Jews have historically lived in the areas more or less tolerant of Judaism. They therefore had more of an opportunity to integrate themselves into the host societies than did their Ashkenazi counterparts living in the countries where Jewish communities were forcebly segregated from the rest. Thus they never really formed separate self-governed units, and the impact made upon the countries of their residence can be traced only through the outstanding Jewish personalities that had effect on the history of those states, and not actions taken by the community as a whole. Whereas in the history of American Jews one may encounter occurrences of political decisions being influenced by the pressure of Jews as a communal force, the history of Middle-Eastern countries is only able to offer examples of brilliant Jewish individuals, but rarely actions taken by the whole communities. The Sephardis (the word itself comes from a Hebrew word for Spain) first came to Europe in the early middle ages across the Straight of Gibraltar to the Iberian peninsula, following the wave of muslim conquerors, into whose society they were at the time well integrated. With the slow reconquest of the peninsula by the Christians a number of the Jews stayed on the land, at times serving as middlemen in the ongoing trade between the two sides of the conflict. Prospering from such lucrative practices, the Sephardic community of the newly created Spain grew and gained economic power. With the final expulsion of the external heretics, the Spanish, devoted Catholics have turned within in their quest for the expulsion of the unfaithful, and around 1492 a decree had forced the Jews of Spain to convert or leave country. While some Jews of Spain have chosen to convert rather than face relocation and possibly relinquish their economic position, (though some of those continued practicing Judaism in secrecy) many of them have migrated to the Ottoman empire, where the Sultan Bayazid II offered them safe haven. In later years as the Ottoman rulers continued the policy of toleration, the Sephardic community of Turkey grew to considerable numbers. Other members of the Spanish Jewry migrated to nearby Portugal from where they were promptly expelled in 1496. From here, some people migrated North to France, where they were tolerated in the southern provinces, and Netherlands. Others went eastward to the Ottoman Empire and Middle East. The Sephardic community of France had maintained a realtively constant population, a fact that allowed it to exist in obscurity, and thus continue to be tolerated. The people who settled in the Netherlands, by this time a country of religious tolerance, had enjoyed for a period of time the equality unparalleled at this point anywhere in the Western world. The main flux of Sephardi immigrants took almost a century incoming to the Netherlands, finally reaching that country around 1590. When half a century later Netherlands began active trade with the South America, Jews were greatly involved because they could speak Dutch and were literate enough to keep records of the trade. They gained a great deal economically through this lucrartive practice, and it was by the way of this trade that first Sephardic Jews have arrived in the Americas. The Ottoman empire, which in its golden age spanned from North Africa to the Balcans, had attracted Jewish immigration from as early as the 1300s. The Sultans sympathy to the Jews went so far that in 1556, Sultan Suleiman the Magnificent had requested from the Pope Paul IV the release of the Ancona Marranos which he declared Ottoman citizens. Over the years, Jews exiled from Hungary, France, Sicily and Bohemia came to the Ottoman empire in search of home, and they found it. A letter sent by Rabbi Yitzhak Sarfati (from Edirne) to Jewish communities in Europe invited his coreligionists to leave the torments they were enduring in Christiandom and to seek safety and prosperity in Turkey. (1) Three centuries after the expulsion of Jews from Spain, the Ottoman cities of Istanbul, Izmud, Safed and Salonica became centers of Sephardic prosperity that was compairable to the period of muslim domination of Spain. While there arent many records of Jews as a community taking historically important actions in the course of their stay in the Ottoman Empire, many individuals worthy of notice are encountered in history. The first printing press in the Empire was established in 1493 by David and Samuel ibn Nahmias, only a year after their exile from Spain. A number of Jews had been diplomats for the Sultan (one of them, Salamon ben Nathan Eskenazi had established first contact with the British Empire), court physicians and otherwise influential people. The Zionist movement was met with drastically different reactions by the two movements. Among the by now enlightened Ashkenazim, where many have come to consider their states objects of primary alligiance, the idea of a return to Palestine was met with suspicions. Some of the people were genuinely afraid that if they acted in support of a Jewish homeland, their loyalties to the countries of their residence would be questioned, and the progress made toward emancipation that had taken long centuries to achieve would be destroyed in a single blow. Among the Sephardim, the ideas of Zionism were met with much greater enthusiasm. (3) The Jews of Middle East, whose religious convictions were at that time much better preserved, had embraced the idea of return to the land of their forefathers. The traditions ran strong among them, and the young generations did not feel resentfull for being forced to obey laws that they felt were outdated. Modernization for European Jews meant catching up with the secular education studies of their hosts, this word hoever, took a totally different meaning when applied to the Jews of Middle-East and Asia, areas to which modernization came later, and which at that point were far behind the technological progress made in the countries of the West. Therefore, while the Jews of Europe had to battle for their equality in a society the education level of which was arguably supperior to that of their own, the Jews of Middle-East had to modernize together with their host nations, and sometimes even ahead of them. The speed of the progress of Middle-Eastern Jews was enhanced by their Western-European counterparts who have by this time established for themselves not only political equality, but also economic prosperity in their adopted homelands. These well-to-do Jews who have for the most part abandoned some or all of their traditions, and have justly considered themselves to be enlightened, wished to bring this enlightenment in the way of Europeanisation to the Jews living outside of the civilized world. (2) The educational institutions created by the Alliance Israelite Universelle have had such great impact on the education of the Jews of the then-decaying Ottoman Empire, that even today, a considerable part of older generation Turkish Jews think of French as their primary means of communication. In Israel the farming communities founded in the late 1800s with the funding of rich European Jewish families as a part of the project to re-settle Palestine, have now grown to become well established businesses. Currently the Israeli Jews represent the only substantial Jewish community left in the Middle East. The surrounding countries, where up until the 1940s many Jews coexisted with Muslim majorities, have over the course of the past half-century lost most of their Jewish population to immigration due to racial and ethnic tensions brought about by the Arab-Israeli conflicts. In fact, the governments of states such as Syria have after the creation of Israel considered the Jews living on their territories to be hostages in this confrontation, and have treated them accordingly. The immigrants from the Arab states being predominantly Sephardic, Israel, a once Ashekenazi dominated country, now has an about even division between the two movements. With their increasing number, the Sephardi influence is also growing in the Israeli legislature, and in the last few years a Sephardi party Shaas has gained substantial power within the Knesset, Israels governing body. The state of Israel is unique in that it is the first country in over two thousand years where Jews have been given the right of self-rule. This raises problems that the Jews in other times, and even the Jews outside of Israel today do not have to deal with. Throughout Israels brief history, a debate as to the extent to which the secular laws should follow the religious doctrine of Judaism had been an ongoing one. Such debates are naturally meaningless in the rest of the world, where the Jews are to follow the laws of the land. The different historical background of the two movements of Judaism has created a noticeable gap in their culture, their traditional laws and their adherence of those laws. It has shaped the manner of their development and the final result of it. The history itself was shaped by the environment in which the exiled Jews found themselves, and the attitude of the people who surrounded them. This attitude was in turn based around their religious doctrine. (1) Bernard Lewis, The Jews of Islam (2) Harvey Goldberg, Sephardi and Middle Eastern Jewries, introductoin p15 (3) Norman Stillman, Sephardi and Middle Eastern Jewries Essay 1, Middle-Eastern and North African Jewries p67 1996, Lev Epshteyn, SUNY Binghamton.

Effect on Trade Flows of Regional Trade Agreements

Effect on Trade Flows of Regional Trade Agreements Abstract This paper studies the effect on trade flows of RTAs signed between developing economies. It uses a variation of the gravity model of trade to asses five RTAs: Mercosur, The Andean Community, SICA, the EU, Chile-China. Contents Abstract iii List of Figures vi List of Tables vi List of Formulas vi 1. Introduction viii 1.1Background viii 1.2 Problem definition x 1.3 Research Objective x 1.3.1 Major research question x 1.3.2 Minor research question xi 1.4 Theoretical Framework xi 1.4.1 The Gravity model of trade xi 1.4.2 Research Methodology and Design xii 1.4.3 Research Assumptions xii 1.4.4 Research Limitations xii 1.5 Thesis Structure xiii 2. Literature Review xiii 2.1 Trade Creation and Trade Diversion xiv 2.1.1 Trade Creation xiv 2.1.2 Trade Diversion xvii 2.1.3 Gross Trade Creation xviii 2.2 Empirical Evidence from SS RTAs xx 3.Theoretical Framework and Research Methodology xxi 3.1 Theoretical Framework xxi 3.1.1 Multiple Regression Analysis and Model Building xxi 3.1.2 Regression Model Diagnosis xxii 3.1.3 The Gravity Model of Trade xxiii 3.1.4 Research Assumptions xxvii 3.1.5 Research Limitations xxvii 3.2 Research Methodology xxvii 3.2.1 Research Type and Approach xxvii 3.2.2 Data Collection xxx 4. Findings and Results xxxi 4.1 The effect of RTAs xxxi 5. Conclusions xxxiii 6. Appendix xxxiv 7. References xxxvii List of Figures Figure 1 Trade Creation. Figure 2 Trade Diversion Figure 3 Trade Creation Proper vrs. Gross Trade Creation Figure 4 Multiple regression hyperplane List of Tables Table 1 Dummy Variable Interpretation.. Table 2 RTAs assessed and Members Table 3 Regression results of individual years Table 4 Regression results of PCS List of Formulas Formula 1 Gravity model equation Formula 2 Log linear form of the gravity model Formula 3 Current gravity specifications.. Abbreviations CGE: Computable General Equilibrium COMESA: Common Market for Eastern and Southern Africa FTA: Free Trade Agreement GATT: General Agreement on Tariffs and Trade GDP: Gross Domestic Product MERCOSUR: Mercado ComÃÆ' ºn del Sur RTA signed between Brazil, Argentina, Uruguay and Paraguay NAFTA: North American Free Trade Agreement OLS: Ordinary Least Squares PCS: Pooled Cross-Section PTA: Preferential Trade Agreement RIA: Regional Integration Agreement RTA: Regional Trade Agreement SICA: Sistema de IntegraciÃÆ' ³n Centro Americana RTA between Honduras, Costa Rica, El Salvador, Guatemala, Nicaragua Panama and Belize SS: South-South UNCTAD: United Nations Conference on Trade and Development WB: World Bank WITS: World Integrated Trade Solution WTO: World Trade Organization 1. Introduction Background Four hundred and sixty two RTAs have been notified to the WTO up to February 2010 (WTO,2010). From 1948-1994 the GATT received one hundred and twenty four notifications of RTAs, and since its creation in 1995, the WTO has received over 300 RTA notifications, (WTO,2010). This trend of forming trading blocs is likely to become stronger as more RTAs are currently under negotiation. Of particular interest to economists, and the focus of this paper, are South-South RTAs, that is, RTAs signed between countries of low income levels. There are reasons to believe that SS RTAs may not only fail to stimulate economic growth among member countries, but also hinder growth for these countries. In their book Regional Integration and Development, Winters and Schiffer (2003) state that there is some evidence that North-South RTAs stimulate economic growth in the southern partner, little evidence that North-North RTAs stimulate growth and NO evidence that South-South RTAs do so. Specifically they argue that SS RTAs do not provide partners with access to technology or knowledge that is characteristic of rich countries; SS RTAs are unlikely to add credibility to government policies and may even hinder investment if not accompanied by liberalization of trade with the rest of the world; and, SS RTAs are likely to generate only trade diversion and no trade creation Mayda and Steinberg (2006) argue that SS RTAs are unlikely to provide the positive effects of competition and economies of scale because partner countries are both small and poor. In addition, the loss of fiscal revenues harms the member country economies and finally, SS RTAs are more likely to divert trade rather than create trade. Willmore (1976) and Nicholls (1998) make similar points using the Central American Common Market as an example. Trade creation and trade diversion are concepts that were introduced by Jacob Viner in 1950. Both terms refer to the redirection of trade flows as a consequence of an RTA. In trade creation, goods that were previously produced by a local economy are instead imported from more efficient producers in countries within the RTA. Trade diversion refers to the redirecting of trade from the more efficient producer to a less efficient producer within the RTA. In both cases, trade creation and trade diversion, the trade flows are affected by the reduction of tariffs to member countries typical of RTAs. Trade creation and trade diversion are explained with more detail in section 2.1 of this paper. A number of studies have been conducted to assess the effects of SS RTAs in partner countries -most of them attempt to determine if the RTAs were trade creating or trade diverting e.g. Evans (1998), Lewis et al. (1999), Flores (1997), Cernat (2001,2003)), Subramanian and Tamirisa (2001), Mayda and Steinberg (2006). Different methods have been used and the results are mixed. As a reference, this paper focuses on the results of Cernat (2001, 2003), Flores (1997), and Mayda and Steinberg (2006). Different methods were used in these studies and the results were mixed. Cernat (2001) used the log-linear form of the gravity equation to assess nine SS RTAs. He finds evidence that suggests that SS RTAs are less trade diverting than theoretically predicted. Cernat (2001) findings suggest that Mercosur and the Andean Community were overall, trade diverting. On the other hand Flores (1997), using a CGE analysis, concluded that Mercosur was trade creating. Mayda and Steinberg (2006) use a difference-in-difference estimation strategy at commodity level to assess the impact of COMESA on Ugandan imports. They present evidence that South-South trade agreements create positive but little economic gains, through changes in trade patterns, for their members. This is different from Cernat (2001) results, which indicate that imports into COMESA members from third countries were on average 30 per cent higher than those predicted without the trade diversion dummy variable. Mayda and Steinberg (2006) find evidence that no trade diversion takes place in COMESA. The mixed results from these studies, the increasing number of SS RTAs underway and the high number of countries wanting to join completely or in part in these RTAs poses the following questions: Why do policy makers from these countries advocate in favor of these RTAs? Should these RTAs be pursued?, and the still not categorically answered question: Are South-South Regional Trade Agreements trade creating or trade diverting? Using the gravity model, this paper aims to get evidence from SS RTAs from the Americas. 1.2 Problem definition Do South-South Regional Trade Agreements create trade or divert trade? The literature on this topic is vast and contradictory. Everybody thinks that SS-RTAs are trade diverting. Some papers present evidence of this. Other present evidence that they are actually trade creating. Finally others find evidence of very little trade creation and no significant evidence of trade diversion. With so many RTAS in place and many others underway, it is important to understand the effects of creating these trade blocs. Should poor countries pursue RTAs with poor countries? Are SS RTAs building blocks or stumbling stones towards the world liberalization of trade? 1.3 Research Objective The main objective of this paper is to determine if MERCOSUR, Andean Community, and SICA were trade creating or trade diverting in the years 1995, 1998, 1999, 2003, 2007. 1.3.1 Major research question Is there significant evidence of trade creation or trade diversion on the years 1995,1998,1999,2003,2007 for Mercosur, Andean Community and SICA? 1.3.2 Minor research question Is there significant evidence that suggests that RTA members of the above mentioned RTAs increased trade between them and their partners? Is there significant evidence that suggests that members of the above mentioned RTAs increased trade between them and third countries? Is there significant evidence that suggests that the increase in trade between RTA partners of the above mentioned RTAs is higher than the decrease in trade between RTA members and third countries? 1.4 Theoretical Framework 1.4.1 The Gravity model of trade The gravity model uses Newtonian gravity principles to study human behavior. It is widely used by economists and social scientists to predict flows of trade, people, goods, money, and other variables as an effect of changes in economic policies, fiscal policies, new laws, bans and other distortions to the flow of a given variable. The original gravity model of trade assumes that two countries will trade more or less depending on the sizes of their economies and the distance between their economic centers. It was created independently by Tinbergen (1962) and PÃÆ' ¶yhÃÆ' ¶nen (1963) and augmented in later years to include other independent variables that may cause a change in trade flows. These augmented versions of the basic gravity model may include: population of the two countries, presence of common borders, same language, common colonizer, and others that the researcher regards as relevant. The gravity model specifications used in this paper are similar to those of Cernat(2001) and Cheng Hall (2003). These specifications are used to run OLS regressions on trade data of 1995, 1998, 1998, 2003 and 2007. One set of pooled data including the years mentioned is analyzed using the same gravity specifications. The results of these regressions provide evidence of gross trade creation and diversion as specified by Balassa (1967) 1.4.2 Research Methodology and Design The paper uses standard OLS analysis, with bilateral imports as a dependent variable and 17 independent variables: GDP of the importing country, GDP of the exporting country, Population of the importing country and population of the exporting country, distance between the capital cities of each country pair, Intra_x dummy variable for each RTA, Extra_x dummy variable for each RTA. The values of GDPs, distance and populations are used in their logarithmic form. GDPs and population data was collected from the WB databank. Trade data was collected from UNCTADs database using the WB banks WITS application. 1.4.3 Research Assumptions Costs of transportation are proportional to the great circle distance between economic centers of countries studied All countries have one economic center, namely their capital cities. The error coefficient of the log-linear gravity model used in this paper is normally distributed with a mean of zero and constant variance for all observations. It is also assumed that error pairs are uncorrelated. GDPs, population, and trade data collected belongs to the population 1.4.4 Research Limitations 1.5 Thesis Structure The remainder of this paper is organized as follows: Chapter 2 presents a literature review that explains trade creation and trade diversion, the effect of both and findings of previous papers that assess RTAs. Chapter 3 explains the gravity model used on the paper, how data was collected and organized, and the considerations in analyzing data. Chapter 4 summarizes the findings and Chapter 5 concludes. 2. Literature Review There is extensive literature on RTAs. This literature either predicts the effects of a RTAs using a computable-general equilibrium analysis or they measure the effects of an FTA using aggregate data or commodity level data. The concern of most authors, and the reason why they conduct their research, is that FTAs and specially SS FTAs may divert trade rather than create it. In the former case, purchases from an efficient producing country are replaced by purchases of a less efficient FTA partner. This section serves three purposes: 1. It explains trade creation and trade diversion to the reader so she can better understand the methodology used to assess the selected RTAs. 2. It presents the reader with the results of previous findings so that the reader can compare the results of this paper with previous results of other authors. 3. It gross trade creation and diversion so that the reader can understand the results of the research. 2.1 Trade Creation and Trade Diversion Trade creation and trade diversion as defined by Viner (1950), refer to changes in flow of trade between nations. Trade creation happens when trade is switched from less efficient producers of one country to more efficient producers in another country a better allocation of resources. In trade diversion trade is shifted from more efficient producers in one country to less efficient producers in another country -a worsening in the allocation of resources. 2.1.1 Trade Creation Trade creation can be defined as the net welfare gain that results from the initiation of an RTA, both on the production and on the consumption side. Some economists though, think that it is more precise to think of trade creation only as the increase in welfare from the production side (Senior-Nello S, 2010). In this paper the former definition of welfare is considered. To understand trade creation, imagine the following scenario (Figure 1): The country in question, Country X, say Honduras, imports product Q from country M (United States) at price Pw+t, which includes an ad valorem tax and is the same price offered by other nations in the world, including country E (El Salvador). At this price, Honduras imports 20 units and consumes 60. The remaining 40 units are imported from the US. This is illustrated by the Honduran supply and demand lines in Figure 1 and the perfectly elastic supply curve with free trade of El Salvador. It is understood that a change in Honduran imports of product Q cannot affect the world price of product Q. Figure 1. Trade Creation If Honduras signed an RTA with El Salvador and the price of product Q from El Salvador dropped to PE, Honduras would now produce 10 units of product Q, consume 70, and import the difference of 60 units. Because El Salvador now offers a lower price for product Q, Honduras now imports this product from El Salvador and not from the US. The consumer surplus gains of this RTA are represented by areas a+b+c+d. The loss in producer surplus is indicated by area a. The loss of tariff revenue for Honduras is area c. Therefore the net welfare increase of this RTA between El Salvador and Honduras is indicated by triangles b and d. Triangle b represents the amount of production that was shifted from less efficient producers in Honduras to more efficient producers in El Salvador a better allocation of resources. Triangle d represents the increase in consumption of product Q. 2.1.2 Trade Diversion Trade Diversion is illustrated in figure 2. Again the supply and demand lines are those of Honduras for product Q. Line S1 and S2 are the perfectly elastic supply curves of USA and El Salvador respectively, and lines S1+t and S2+t are the tax inclusive supply curves of the same two countries. Figure 2. Trade Diversion Honduras imports product Q from the US at tax inclusive price Pw+t. El Salvador offers product Q at price PE+t and thus does not benefit from Honduran purchases. At price Pw+t Honduras produces 20 units, consumes 60, and imports 40 from the US. If Honduras and El Salvador now form an RTA and do not include the US, tariffs will be removed on imports from El Salvador but not from imports from the US. After forming the RTA Honduras would produce 10 million units, consume 80 million and import 60 million units of product Q from El Salvador at price PE. The RTA has diverted trade from more efficient producers in the US to less efficient producers in El Salvador, so there is a worsening in the allocation of resources. On the other hand 10 million units are now imported from El Salvador instead of being produced at home in Honduras. At the same time 40 million units that were previously imported from the US are now being imported from El Salvador. The welfare loss from trade diversion is reflected rectangle f. The 40 million units that were imported from more efficient producers in the US whose free trade price is $1.00 are now imported from El Salvador at $2.00. The welfare loss is $40 million. The welfare gain from the customs union is calculated as the areas of triangles b and d. Triangle b is the welfare gain in the production side: $5 million. Triangle d is the welfare gain in the consumption side: $10 million. The total impact on welfare as a result of the RTA is given by the sum of the areas of triangles b and d minus the area of rectangle f (b+d-f): welfare gain minus welfare loss. In this case the RTA generated a welfare loss of $25 million. Figure 2 illustrates that the idea of trade creation and trade diversion can be misleading. If, for example, the sum of areas of triangles b and d would be greater than the area of rectangle f, the RTA would cause a net welfare gain. In this scenario, although trade has been diverted from more efficient producers in one country to less efficient producers in another, the RTA increased welfare for the RTA signing country. 2.1.3 Gross Trade Creation Following the lead of Jacob Viner, Balassa (1967) evaluated the effects of the European Common Market with reference to its trade creating and trade diverting effect using Tinbergen (1962) and PÃÆ' ¶yhÃÆ' ¶nen (1963) model -the gravity model. In his work he developed model that captured substitution of less efficient domestic and foreign suppliers for more efficient foreign suppliers gross trade creation; which is different than Viners definition of trade creation according to which trade is created only at the expense of local producers. To illustrate the difference gross trade creation and trade creation proper as defined by Viner (1950), consider three trading partners of one particular product countries A, B, and C, product Q (See Figure 3). Before signing a RTA with country B, Country A imports product Q from both, Country B and Country C in equal amounts and has 4 local producers of the same product (Figure 3a). In the case of trade creation proper (Figure 3b), after signing a RTA with country B, Country A continues to import equal amounts of product Q from countries B and C but has reduced the number of local producers of the same product. More efficient producers in Country B have absorbed market share from local producers in Country A trade creation proper. Gross trade creation on the other hand (Figure 3c), considers that trade is created not only when local producers are substituted, but also when producers in third countries are substituted. In this case, after signing a RTA with country B, Country A decreases its imports of product Q from Country C and increases imports of the same product from Country B while keeping the same number of local producers. It is important to note that gross trade creation assumes that substituted producers in Country C were less efficient than producers in country B; the contrary would constitute trade diversion. Figure 3. Trade Creation Proper vrs Gross Trade Creation Like in Cernat (2001), this paper evaluates the gross trade creating effects of the assessed RTAs. In his paper, Balassa (1967) provides evidence of trade creation in the European Common Market during six years since the Markets establishment. Again, trade creation applies to the substitution of any less efficient producer for a more efficient one, independent of the producers base country. The why of the expected differences between the results of developed country RTAs and SS RTAs is explained in the next section. 2.2 Empirical Evidence from SS RTAs A number of studies have been conducted to assess the effects of SS RTAs in partner countries -most of them attempt to determine if the RTAs were trade creating or trade diverting e.g. Evans (1998), Lewis et al. (1999), Flores (1997), Cernat (2001), Subramanian and Tamirisa (2001), Cernat (2003), Mayda and Steinberg (2006). Different methods have been used and the results are mixed. This paper uses methods similar to Cernat (2001) and Cheng Wall (2003). In his paper, Cernat(2001) used the log-linear form of the gravity equation to asses nine SS RTAs. He finds evidence that suggests that SS RTAs are less trade diverting than theoretically predicted. Cernats(2001) findings suggest that Mercosur and the Andean Community were overall, trade diverting. Mayda and Steinberg(2006) use a difference-in-difference estimation strategy at commodity level to assess the impact of COMESA on Ugandan imports. They present evidence that South-South trade agreements create positive but little economic gains, through changes in trade patterns, for their members (Mayda and Steinberg, 2003). This is different from Cernats(2001) results, which indicate that imports into COMESA members from third countries were on average 30 per cent higher than those predicted without the trade diversion dummy variable. Mayda and Steinberg (2006) find evidence that no trade diversion takes place in COMESA. The mixed results from these studies, the increasing number of SS RTAs underway and the high number of countries wanting to join completely or in part in these RTAs poses the following questions: Why do policy makers from these countries advocate in favor of these RTAs? Should these RTAs be pursued?, and the still not categorically answered question: Are South-South Regional Trade Agreements trade creating or trade diverting? Using the gravity model, this paper aims to get evidence from SS RTAs from the Americas. Theoretical Framework and Research Methodology ***Intro*** Problem Definition Research Objective Research Questions 3.1 Theoretical Framework 3.1.1 Multiple Regression Analysis and Model Building Figure 4. Regression Hyperplane Multiple regression analysis is a method of inferential statistics that measures the relationship between two or more independent variables and one dependent variable. The multiple regression model is given by: Where: y = dependent variable = regression constant of the population = regression coefficient for each variable xj=1,2,k k = number of independent variables = error of the model Different from a simple regression equation -which forms a straight line in a two-dimensional space to represent the linear relationship between two variables the multiple regression model forms a hyperplane in a multidimensional space (Figure 4). This hyperplane represents the relationship between the dependent variable and k independent variables. To build a multiple regression model, that is, to construct a mathematical equation that represents the relationship between independent and dependent variables, a researcher must decide: The question that needs to be answered The potential independent variables What is a representative sample of the population should be at least four times the number of independent variables (Groebner, et al, 2008) The model used in this paper is well known and widely used by social scientists to measure the flow of various types of variables. This model is explained in section 3.1.3. 3.1.2 Regression Model Diagnosis To ensure the significance of an OLS regression analysis results, the following evaluation criteria are usually used (Groebner, et al, 2008): The coefficient of determination (R2 and R2 adjusted) Significance of the overall model (F-test) Significance of individual variables (t-tests) Size of the standard deviation of the model Multicollinearity of variables The coefficient of determination measures the proportion of variation in the dependent variable that can be explained with the independent variables used by the model. The value of R2 may range from 0-1, with 1 representing a perfect linear relationship between dependent and independent variables. Higher values of R2 are preferred as they would indicate that the chosen independent variables explain better the variations in the dependent variables. A derivate indicator, called adjusted R2, takes into account the number of independent variables in the model, and their contribution the variations in the dependent variable. Because R2 increases when independent variables are added to the model, even if the new variables have no relationship with the dependent variable, adjusted R2 evaluates the model more precisely. The Significance of the overall model can be determined by comparing the Significance F value given in the regression output of a statistical software application, and the critical value for a given alpha level. The critical value for a given alpha level is determined using t-tables and statistical procedures explained in Groebner (2008). The Significance of individual variables is determined by comparing their calculated t-values with the critical t-value of the model. If their calculated t-values are greater than their critical t-values the variable is considered significant. To determine the critical t-values of independent variables, degrees of freedom need to be calculated and interpolated with the desired level of significance in a t-table. For detailed explanations see Groebner (2008). The size of the standard deviation of the model measures the dispersion of observed values of the dependent variable, and the predicted values for the same variable. It is up to the researcher to determine an acceptable range for the standard error estimation. Multicollinearity occurs when two variables provide overlapping information to explain the variation in the dependent variable. To measure multicollinearity the researcher can use the VIF as an indicator. Generally, if the VIF 3.1.3 The Gravity Model of Trade Following Isaac Newtons principle of gravity, according to which two bodies will attract each other more when their sizes are increased and the distance between them is shortened; the gravity model explains trade flow between two countries based on the size of their economies and the distance between their economic centers. The equation representation of the gravity model of trade is: (Formula 1) Where Fg represents trade flow, G is the constant, m1 and m2 are the economic dimensions of the two countries in question, and d is the distance between the two countries. In its basic log-linear form, the gravity equation is as follows: (Formula2) Where is the bilateral trade flow between countries i and j at time t, ÃŽÂ ± is the constant, is the natural logarithm of the GDP of country i, is the natural logarithm of the GDP of country j, is the natural logarithm of the distance between country i and country j, and ÃŽÂ µ is the normally distributed error. This basic gravity model is usually augmented by including other variables like adjacency, common language, colonial links, common currency, and RTA membership among others. Different authors have suggested many different specifications for the gravity model of trade  [1]  , however there is no consensus about which model specification is more accurate and serves best in assessing RTAs. Moreover other authors have suggested that the gravity model is biased due to endogeneity and reverse causality (Magee, 2003) and have led others to use entirely different methods to asses RTAs (Mayda Steinberg (2006). This paper uses a gravity model specification that is similar to Cernat (2001) but considers Cheng Walls (2003) suggestions of eliminating dummy variables that might capture unintended trade distorting variables. To assess trade creation and trade diversion in nine RTAs, Cernat(2001) adds two dummy variables to an already augmented specification of the model: Intra_RTA and Extra_RTA. The Intra_RTA dummy becomes a 1 when both, the importing and the exporting countries, are partners in the RTA being assessed by the two dummies. The Extra_RTA dummy becomes one when the importing country is part of the assessed RTA but the exporter is a third country. The model uses bilateral trade flows as a dependent variable and 18 independent variables: GDP of importing country, GDP of the exporting country, GDP per capita of the importing country, GDP per capita of the exporting country, Population of the importing country, population of the exporting country, distance between the capital cities of both countries, an adjacency dummy variable, a common language dummy variable, nine Intra_RTA dummy variables (one for each RTA assessed), and nine Extra_RTA dummy variables (one for each RTA assessed). All non-dummy variables expressed in their logarithmic form. In theory, the Intra_RTA dummies will capture the effect that the assessed RTA had on trade between partners of the RTA; and the Extra_RTA dummy captures the effect of the same RTA on trade of RTA members with third countries. To diagnose a RTA as trade crating or trade diverting, Cernat (2001) designed an Intra-Extra coefficient table (Table# in this paper). According to this table, if a trade agreement increased trade between its partners at the expense of third countries -diverted trade, the Intra_RTA dummy should be positive and the Extra_RTA dummy negative. If the agreement created trade instead, the coefficients of both dummies would be positive. Coefficient Extra_RTA Intra_RTA Sign + + Trade creation and trade expansion Trade diversion Trade expansion Trade contraction Table 1: Dummy Variable Interpretation Cheng Wall (2003) use a fixed-effect panel data analysis to measure the effect on trade of RTAs over time. Their proposed model allegedly controls the heterogeneity bias in the gravity model of trade. In it, Cheng Wall (2003) drop all dummy variables and even drop the distance variable. They argue that these variables bias the gravity model and they motivate their argument in a number of ways. First, they reason that economic distances are too hard to measure with accuracy because big countries have many economic centers, that are thousands of miles apart and that serve as trade centers for diffe Effect on Trade Flows of Regional Trade Agreements Effect on Trade Flows of Regional Trade Agreements Abstract This paper studies the effect on trade flows of RTAs signed between developing economies. It uses a variation of the gravity model of trade to asses five RTAs: Mercosur, The Andean Community, SICA, the EU, Chile-China. Contents Abstract iii List of Figures vi List of Tables vi List of Formulas vi 1. Introduction viii 1.1Background viii 1.2 Problem definition x 1.3 Research Objective x 1.3.1 Major research question x 1.3.2 Minor research question xi 1.4 Theoretical Framework xi 1.4.1 The Gravity model of trade xi 1.4.2 Research Methodology and Design xii 1.4.3 Research Assumptions xii 1.4.4 Research Limitations xii 1.5 Thesis Structure xiii 2. Literature Review xiii 2.1 Trade Creation and Trade Diversion xiv 2.1.1 Trade Creation xiv 2.1.2 Trade Diversion xvii 2.1.3 Gross Trade Creation xviii 2.2 Empirical Evidence from SS RTAs xx 3.Theoretical Framework and Research Methodology xxi 3.1 Theoretical Framework xxi 3.1.1 Multiple Regression Analysis and Model Building xxi 3.1.2 Regression Model Diagnosis xxii 3.1.3 The Gravity Model of Trade xxiii 3.1.4 Research Assumptions xxvii 3.1.5 Research Limitations xxvii 3.2 Research Methodology xxvii 3.2.1 Research Type and Approach xxvii 3.2.2 Data Collection xxx 4. Findings and Results xxxi 4.1 The effect of RTAs xxxi 5. Conclusions xxxiii 6. Appendix xxxiv 7. References xxxvii List of Figures Figure 1 Trade Creation. Figure 2 Trade Diversion Figure 3 Trade Creation Proper vrs. Gross Trade Creation Figure 4 Multiple regression hyperplane List of Tables Table 1 Dummy Variable Interpretation.. Table 2 RTAs assessed and Members Table 3 Regression results of individual years Table 4 Regression results of PCS List of Formulas Formula 1 Gravity model equation Formula 2 Log linear form of the gravity model Formula 3 Current gravity specifications.. Abbreviations CGE: Computable General Equilibrium COMESA: Common Market for Eastern and Southern Africa FTA: Free Trade Agreement GATT: General Agreement on Tariffs and Trade GDP: Gross Domestic Product MERCOSUR: Mercado ComÃÆ' ºn del Sur RTA signed between Brazil, Argentina, Uruguay and Paraguay NAFTA: North American Free Trade Agreement OLS: Ordinary Least Squares PCS: Pooled Cross-Section PTA: Preferential Trade Agreement RIA: Regional Integration Agreement RTA: Regional Trade Agreement SICA: Sistema de IntegraciÃÆ' ³n Centro Americana RTA between Honduras, Costa Rica, El Salvador, Guatemala, Nicaragua Panama and Belize SS: South-South UNCTAD: United Nations Conference on Trade and Development WB: World Bank WITS: World Integrated Trade Solution WTO: World Trade Organization 1. Introduction Background Four hundred and sixty two RTAs have been notified to the WTO up to February 2010 (WTO,2010). From 1948-1994 the GATT received one hundred and twenty four notifications of RTAs, and since its creation in 1995, the WTO has received over 300 RTA notifications, (WTO,2010). This trend of forming trading blocs is likely to become stronger as more RTAs are currently under negotiation. Of particular interest to economists, and the focus of this paper, are South-South RTAs, that is, RTAs signed between countries of low income levels. There are reasons to believe that SS RTAs may not only fail to stimulate economic growth among member countries, but also hinder growth for these countries. In their book Regional Integration and Development, Winters and Schiffer (2003) state that there is some evidence that North-South RTAs stimulate economic growth in the southern partner, little evidence that North-North RTAs stimulate growth and NO evidence that South-South RTAs do so. Specifically they argue that SS RTAs do not provide partners with access to technology or knowledge that is characteristic of rich countries; SS RTAs are unlikely to add credibility to government policies and may even hinder investment if not accompanied by liberalization of trade with the rest of the world; and, SS RTAs are likely to generate only trade diversion and no trade creation Mayda and Steinberg (2006) argue that SS RTAs are unlikely to provide the positive effects of competition and economies of scale because partner countries are both small and poor. In addition, the loss of fiscal revenues harms the member country economies and finally, SS RTAs are more likely to divert trade rather than create trade. Willmore (1976) and Nicholls (1998) make similar points using the Central American Common Market as an example. Trade creation and trade diversion are concepts that were introduced by Jacob Viner in 1950. Both terms refer to the redirection of trade flows as a consequence of an RTA. In trade creation, goods that were previously produced by a local economy are instead imported from more efficient producers in countries within the RTA. Trade diversion refers to the redirecting of trade from the more efficient producer to a less efficient producer within the RTA. In both cases, trade creation and trade diversion, the trade flows are affected by the reduction of tariffs to member countries typical of RTAs. Trade creation and trade diversion are explained with more detail in section 2.1 of this paper. A number of studies have been conducted to assess the effects of SS RTAs in partner countries -most of them attempt to determine if the RTAs were trade creating or trade diverting e.g. Evans (1998), Lewis et al. (1999), Flores (1997), Cernat (2001,2003)), Subramanian and Tamirisa (2001), Mayda and Steinberg (2006). Different methods have been used and the results are mixed. As a reference, this paper focuses on the results of Cernat (2001, 2003), Flores (1997), and Mayda and Steinberg (2006). Different methods were used in these studies and the results were mixed. Cernat (2001) used the log-linear form of the gravity equation to assess nine SS RTAs. He finds evidence that suggests that SS RTAs are less trade diverting than theoretically predicted. Cernat (2001) findings suggest that Mercosur and the Andean Community were overall, trade diverting. On the other hand Flores (1997), using a CGE analysis, concluded that Mercosur was trade creating. Mayda and Steinberg (2006) use a difference-in-difference estimation strategy at commodity level to assess the impact of COMESA on Ugandan imports. They present evidence that South-South trade agreements create positive but little economic gains, through changes in trade patterns, for their members. This is different from Cernat (2001) results, which indicate that imports into COMESA members from third countries were on average 30 per cent higher than those predicted without the trade diversion dummy variable. Mayda and Steinberg (2006) find evidence that no trade diversion takes place in COMESA. The mixed results from these studies, the increasing number of SS RTAs underway and the high number of countries wanting to join completely or in part in these RTAs poses the following questions: Why do policy makers from these countries advocate in favor of these RTAs? Should these RTAs be pursued?, and the still not categorically answered question: Are South-South Regional Trade Agreements trade creating or trade diverting? Using the gravity model, this paper aims to get evidence from SS RTAs from the Americas. 1.2 Problem definition Do South-South Regional Trade Agreements create trade or divert trade? The literature on this topic is vast and contradictory. Everybody thinks that SS-RTAs are trade diverting. Some papers present evidence of this. Other present evidence that they are actually trade creating. Finally others find evidence of very little trade creation and no significant evidence of trade diversion. With so many RTAS in place and many others underway, it is important to understand the effects of creating these trade blocs. Should poor countries pursue RTAs with poor countries? Are SS RTAs building blocks or stumbling stones towards the world liberalization of trade? 1.3 Research Objective The main objective of this paper is to determine if MERCOSUR, Andean Community, and SICA were trade creating or trade diverting in the years 1995, 1998, 1999, 2003, 2007. 1.3.1 Major research question Is there significant evidence of trade creation or trade diversion on the years 1995,1998,1999,2003,2007 for Mercosur, Andean Community and SICA? 1.3.2 Minor research question Is there significant evidence that suggests that RTA members of the above mentioned RTAs increased trade between them and their partners? Is there significant evidence that suggests that members of the above mentioned RTAs increased trade between them and third countries? Is there significant evidence that suggests that the increase in trade between RTA partners of the above mentioned RTAs is higher than the decrease in trade between RTA members and third countries? 1.4 Theoretical Framework 1.4.1 The Gravity model of trade The gravity model uses Newtonian gravity principles to study human behavior. It is widely used by economists and social scientists to predict flows of trade, people, goods, money, and other variables as an effect of changes in economic policies, fiscal policies, new laws, bans and other distortions to the flow of a given variable. The original gravity model of trade assumes that two countries will trade more or less depending on the sizes of their economies and the distance between their economic centers. It was created independently by Tinbergen (1962) and PÃÆ' ¶yhÃÆ' ¶nen (1963) and augmented in later years to include other independent variables that may cause a change in trade flows. These augmented versions of the basic gravity model may include: population of the two countries, presence of common borders, same language, common colonizer, and others that the researcher regards as relevant. The gravity model specifications used in this paper are similar to those of Cernat(2001) and Cheng Hall (2003). These specifications are used to run OLS regressions on trade data of 1995, 1998, 1998, 2003 and 2007. One set of pooled data including the years mentioned is analyzed using the same gravity specifications. The results of these regressions provide evidence of gross trade creation and diversion as specified by Balassa (1967) 1.4.2 Research Methodology and Design The paper uses standard OLS analysis, with bilateral imports as a dependent variable and 17 independent variables: GDP of the importing country, GDP of the exporting country, Population of the importing country and population of the exporting country, distance between the capital cities of each country pair, Intra_x dummy variable for each RTA, Extra_x dummy variable for each RTA. The values of GDPs, distance and populations are used in their logarithmic form. GDPs and population data was collected from the WB databank. Trade data was collected from UNCTADs database using the WB banks WITS application. 1.4.3 Research Assumptions Costs of transportation are proportional to the great circle distance between economic centers of countries studied All countries have one economic center, namely their capital cities. The error coefficient of the log-linear gravity model used in this paper is normally distributed with a mean of zero and constant variance for all observations. It is also assumed that error pairs are uncorrelated. GDPs, population, and trade data collected belongs to the population 1.4.4 Research Limitations 1.5 Thesis Structure The remainder of this paper is organized as follows: Chapter 2 presents a literature review that explains trade creation and trade diversion, the effect of both and findings of previous papers that assess RTAs. Chapter 3 explains the gravity model used on the paper, how data was collected and organized, and the considerations in analyzing data. Chapter 4 summarizes the findings and Chapter 5 concludes. 2. Literature Review There is extensive literature on RTAs. This literature either predicts the effects of a RTAs using a computable-general equilibrium analysis or they measure the effects of an FTA using aggregate data or commodity level data. The concern of most authors, and the reason why they conduct their research, is that FTAs and specially SS FTAs may divert trade rather than create it. In the former case, purchases from an efficient producing country are replaced by purchases of a less efficient FTA partner. This section serves three purposes: 1. It explains trade creation and trade diversion to the reader so she can better understand the methodology used to assess the selected RTAs. 2. It presents the reader with the results of previous findings so that the reader can compare the results of this paper with previous results of other authors. 3. It gross trade creation and diversion so that the reader can understand the results of the research. 2.1 Trade Creation and Trade Diversion Trade creation and trade diversion as defined by Viner (1950), refer to changes in flow of trade between nations. Trade creation happens when trade is switched from less efficient producers of one country to more efficient producers in another country a better allocation of resources. In trade diversion trade is shifted from more efficient producers in one country to less efficient producers in another country -a worsening in the allocation of resources. 2.1.1 Trade Creation Trade creation can be defined as the net welfare gain that results from the initiation of an RTA, both on the production and on the consumption side. Some economists though, think that it is more precise to think of trade creation only as the increase in welfare from the production side (Senior-Nello S, 2010). In this paper the former definition of welfare is considered. To understand trade creation, imagine the following scenario (Figure 1): The country in question, Country X, say Honduras, imports product Q from country M (United States) at price Pw+t, which includes an ad valorem tax and is the same price offered by other nations in the world, including country E (El Salvador). At this price, Honduras imports 20 units and consumes 60. The remaining 40 units are imported from the US. This is illustrated by the Honduran supply and demand lines in Figure 1 and the perfectly elastic supply curve with free trade of El Salvador. It is understood that a change in Honduran imports of product Q cannot affect the world price of product Q. Figure 1. Trade Creation If Honduras signed an RTA with El Salvador and the price of product Q from El Salvador dropped to PE, Honduras would now produce 10 units of product Q, consume 70, and import the difference of 60 units. Because El Salvador now offers a lower price for product Q, Honduras now imports this product from El Salvador and not from the US. The consumer surplus gains of this RTA are represented by areas a+b+c+d. The loss in producer surplus is indicated by area a. The loss of tariff revenue for Honduras is area c. Therefore the net welfare increase of this RTA between El Salvador and Honduras is indicated by triangles b and d. Triangle b represents the amount of production that was shifted from less efficient producers in Honduras to more efficient producers in El Salvador a better allocation of resources. Triangle d represents the increase in consumption of product Q. 2.1.2 Trade Diversion Trade Diversion is illustrated in figure 2. Again the supply and demand lines are those of Honduras for product Q. Line S1 and S2 are the perfectly elastic supply curves of USA and El Salvador respectively, and lines S1+t and S2+t are the tax inclusive supply curves of the same two countries. Figure 2. Trade Diversion Honduras imports product Q from the US at tax inclusive price Pw+t. El Salvador offers product Q at price PE+t and thus does not benefit from Honduran purchases. At price Pw+t Honduras produces 20 units, consumes 60, and imports 40 from the US. If Honduras and El Salvador now form an RTA and do not include the US, tariffs will be removed on imports from El Salvador but not from imports from the US. After forming the RTA Honduras would produce 10 million units, consume 80 million and import 60 million units of product Q from El Salvador at price PE. The RTA has diverted trade from more efficient producers in the US to less efficient producers in El Salvador, so there is a worsening in the allocation of resources. On the other hand 10 million units are now imported from El Salvador instead of being produced at home in Honduras. At the same time 40 million units that were previously imported from the US are now being imported from El Salvador. The welfare loss from trade diversion is reflected rectangle f. The 40 million units that were imported from more efficient producers in the US whose free trade price is $1.00 are now imported from El Salvador at $2.00. The welfare loss is $40 million. The welfare gain from the customs union is calculated as the areas of triangles b and d. Triangle b is the welfare gain in the production side: $5 million. Triangle d is the welfare gain in the consumption side: $10 million. The total impact on welfare as a result of the RTA is given by the sum of the areas of triangles b and d minus the area of rectangle f (b+d-f): welfare gain minus welfare loss. In this case the RTA generated a welfare loss of $25 million. Figure 2 illustrates that the idea of trade creation and trade diversion can be misleading. If, for example, the sum of areas of triangles b and d would be greater than the area of rectangle f, the RTA would cause a net welfare gain. In this scenario, although trade has been diverted from more efficient producers in one country to less efficient producers in another, the RTA increased welfare for the RTA signing country. 2.1.3 Gross Trade Creation Following the lead of Jacob Viner, Balassa (1967) evaluated the effects of the European Common Market with reference to its trade creating and trade diverting effect using Tinbergen (1962) and PÃÆ' ¶yhÃÆ' ¶nen (1963) model -the gravity model. In his work he developed model that captured substitution of less efficient domestic and foreign suppliers for more efficient foreign suppliers gross trade creation; which is different than Viners definition of trade creation according to which trade is created only at the expense of local producers. To illustrate the difference gross trade creation and trade creation proper as defined by Viner (1950), consider three trading partners of one particular product countries A, B, and C, product Q (See Figure 3). Before signing a RTA with country B, Country A imports product Q from both, Country B and Country C in equal amounts and has 4 local producers of the same product (Figure 3a). In the case of trade creation proper (Figure 3b), after signing a RTA with country B, Country A continues to import equal amounts of product Q from countries B and C but has reduced the number of local producers of the same product. More efficient producers in Country B have absorbed market share from local producers in Country A trade creation proper. Gross trade creation on the other hand (Figure 3c), considers that trade is created not only when local producers are substituted, but also when producers in third countries are substituted. In this case, after signing a RTA with country B, Country A decreases its imports of product Q from Country C and increases imports of the same product from Country B while keeping the same number of local producers. It is important to note that gross trade creation assumes that substituted producers in Country C were less efficient than producers in country B; the contrary would constitute trade diversion. Figure 3. Trade Creation Proper vrs Gross Trade Creation Like in Cernat (2001), this paper evaluates the gross trade creating effects of the assessed RTAs. In his paper, Balassa (1967) provides evidence of trade creation in the European Common Market during six years since the Markets establishment. Again, trade creation applies to the substitution of any less efficient producer for a more efficient one, independent of the producers base country. The why of the expected differences between the results of developed country RTAs and SS RTAs is explained in the next section. 2.2 Empirical Evidence from SS RTAs A number of studies have been conducted to assess the effects of SS RTAs in partner countries -most of them attempt to determine if the RTAs were trade creating or trade diverting e.g. Evans (1998), Lewis et al. (1999), Flores (1997), Cernat (2001), Subramanian and Tamirisa (2001), Cernat (2003), Mayda and Steinberg (2006). Different methods have been used and the results are mixed. This paper uses methods similar to Cernat (2001) and Cheng Wall (2003). In his paper, Cernat(2001) used the log-linear form of the gravity equation to asses nine SS RTAs. He finds evidence that suggests that SS RTAs are less trade diverting than theoretically predicted. Cernats(2001) findings suggest that Mercosur and the Andean Community were overall, trade diverting. Mayda and Steinberg(2006) use a difference-in-difference estimation strategy at commodity level to assess the impact of COMESA on Ugandan imports. They present evidence that South-South trade agreements create positive but little economic gains, through changes in trade patterns, for their members (Mayda and Steinberg, 2003). This is different from Cernats(2001) results, which indicate that imports into COMESA members from third countries were on average 30 per cent higher than those predicted without the trade diversion dummy variable. Mayda and Steinberg (2006) find evidence that no trade diversion takes place in COMESA. The mixed results from these studies, the increasing number of SS RTAs underway and the high number of countries wanting to join completely or in part in these RTAs poses the following questions: Why do policy makers from these countries advocate in favor of these RTAs? Should these RTAs be pursued?, and the still not categorically answered question: Are South-South Regional Trade Agreements trade creating or trade diverting? Using the gravity model, this paper aims to get evidence from SS RTAs from the Americas. Theoretical Framework and Research Methodology ***Intro*** Problem Definition Research Objective Research Questions 3.1 Theoretical Framework 3.1.1 Multiple Regression Analysis and Model Building Figure 4. Regression Hyperplane Multiple regression analysis is a method of inferential statistics that measures the relationship between two or more independent variables and one dependent variable. The multiple regression model is given by: Where: y = dependent variable = regression constant of the population = regression coefficient for each variable xj=1,2,k k = number of independent variables = error of the model Different from a simple regression equation -which forms a straight line in a two-dimensional space to represent the linear relationship between two variables the multiple regression model forms a hyperplane in a multidimensional space (Figure 4). This hyperplane represents the relationship between the dependent variable and k independent variables. To build a multiple regression model, that is, to construct a mathematical equation that represents the relationship between independent and dependent variables, a researcher must decide: The question that needs to be answered The potential independent variables What is a representative sample of the population should be at least four times the number of independent variables (Groebner, et al, 2008) The model used in this paper is well known and widely used by social scientists to measure the flow of various types of variables. This model is explained in section 3.1.3. 3.1.2 Regression Model Diagnosis To ensure the significance of an OLS regression analysis results, the following evaluation criteria are usually used (Groebner, et al, 2008): The coefficient of determination (R2 and R2 adjusted) Significance of the overall model (F-test) Significance of individual variables (t-tests) Size of the standard deviation of the model Multicollinearity of variables The coefficient of determination measures the proportion of variation in the dependent variable that can be explained with the independent variables used by the model. The value of R2 may range from 0-1, with 1 representing a perfect linear relationship between dependent and independent variables. Higher values of R2 are preferred as they would indicate that the chosen independent variables explain better the variations in the dependent variables. A derivate indicator, called adjusted R2, takes into account the number of independent variables in the model, and their contribution the variations in the dependent variable. Because R2 increases when independent variables are added to the model, even if the new variables have no relationship with the dependent variable, adjusted R2 evaluates the model more precisely. The Significance of the overall model can be determined by comparing the Significance F value given in the regression output of a statistical software application, and the critical value for a given alpha level. The critical value for a given alpha level is determined using t-tables and statistical procedures explained in Groebner (2008). The Significance of individual variables is determined by comparing their calculated t-values with the critical t-value of the model. If their calculated t-values are greater than their critical t-values the variable is considered significant. To determine the critical t-values of independent variables, degrees of freedom need to be calculated and interpolated with the desired level of significance in a t-table. For detailed explanations see Groebner (2008). The size of the standard deviation of the model measures the dispersion of observed values of the dependent variable, and the predicted values for the same variable. It is up to the researcher to determine an acceptable range for the standard error estimation. Multicollinearity occurs when two variables provide overlapping information to explain the variation in the dependent variable. To measure multicollinearity the researcher can use the VIF as an indicator. Generally, if the VIF 3.1.3 The Gravity Model of Trade Following Isaac Newtons principle of gravity, according to which two bodies will attract each other more when their sizes are increased and the distance between them is shortened; the gravity model explains trade flow between two countries based on the size of their economies and the distance between their economic centers. The equation representation of the gravity model of trade is: (Formula 1) Where Fg represents trade flow, G is the constant, m1 and m2 are the economic dimensions of the two countries in question, and d is the distance between the two countries. In its basic log-linear form, the gravity equation is as follows: (Formula2) Where is the bilateral trade flow between countries i and j at time t, ÃŽÂ ± is the constant, is the natural logarithm of the GDP of country i, is the natural logarithm of the GDP of country j, is the natural logarithm of the distance between country i and country j, and ÃŽÂ µ is the normally distributed error. This basic gravity model is usually augmented by including other variables like adjacency, common language, colonial links, common currency, and RTA membership among others. Different authors have suggested many different specifications for the gravity model of trade  [1]  , however there is no consensus about which model specification is more accurate and serves best in assessing RTAs. Moreover other authors have suggested that the gravity model is biased due to endogeneity and reverse causality (Magee, 2003) and have led others to use entirely different methods to asses RTAs (Mayda Steinberg (2006). This paper uses a gravity model specification that is similar to Cernat (2001) but considers Cheng Walls (2003) suggestions of eliminating dummy variables that might capture unintended trade distorting variables. To assess trade creation and trade diversion in nine RTAs, Cernat(2001) adds two dummy variables to an already augmented specification of the model: Intra_RTA and Extra_RTA. The Intra_RTA dummy becomes a 1 when both, the importing and the exporting countries, are partners in the RTA being assessed by the two dummies. The Extra_RTA dummy becomes one when the importing country is part of the assessed RTA but the exporter is a third country. The model uses bilateral trade flows as a dependent variable and 18 independent variables: GDP of importing country, GDP of the exporting country, GDP per capita of the importing country, GDP per capita of the exporting country, Population of the importing country, population of the exporting country, distance between the capital cities of both countries, an adjacency dummy variable, a common language dummy variable, nine Intra_RTA dummy variables (one for each RTA assessed), and nine Extra_RTA dummy variables (one for each RTA assessed). All non-dummy variables expressed in their logarithmic form. In theory, the Intra_RTA dummies will capture the effect that the assessed RTA had on trade between partners of the RTA; and the Extra_RTA dummy captures the effect of the same RTA on trade of RTA members with third countries. To diagnose a RTA as trade crating or trade diverting, Cernat (2001) designed an Intra-Extra coefficient table (Table# in this paper). According to this table, if a trade agreement increased trade between its partners at the expense of third countries -diverted trade, the Intra_RTA dummy should be positive and the Extra_RTA dummy negative. If the agreement created trade instead, the coefficients of both dummies would be positive. Coefficient Extra_RTA Intra_RTA Sign + + Trade creation and trade expansion Trade diversion Trade expansion Trade contraction Table 1: Dummy Variable Interpretation Cheng Wall (2003) use a fixed-effect panel data analysis to measure the effect on trade of RTAs over time. Their proposed model allegedly controls the heterogeneity bias in the gravity model of trade. In it, Cheng Wall (2003) drop all dummy variables and even drop the distance variable. They argue that these variables bias the gravity model and they motivate their argument in a number of ways. First, they reason that economic distances are too hard to measure with accuracy because big countries have many economic centers, that are thousands of miles apart and that serve as trade centers for diffe