until recently ignored. Now, however, arguments are being raised which suggest that the direction of the trade of developing countries, in particular, is important. The contention seems to be based on two premises: first, that developing countries benefit more from trading with each other than with the industrial world; and, second, that obstacles exist resulting in less South-Southtrade than may be desirable.
This article attempts to evaluate the economic and empirical validity of these arguments on the basis of trade movements among developing countries between
South-South trade agreements are proliferating: Developing countries signed 70 new agreements between 1990 and 2003. Yet the impact of these agreements is largely unknown. This paper focuses on the static effects of South-South preferential trade agreements stemming from changes in trade patterns. Specifically, it estimates the impact of the Common Market for Eastern and Southern Africa (COMESA) on Uganda's imports between 1994 and 2003. Detailed import and tariff data at the 6-digit harmonized system level are used for more than 1,000 commodities. Based on a difference-in-difference estimation strategy, the paper finds that-in contrast to evidence from aggregate statistics-COMESA's preferential tariff liberalization has not considerably increased Uganda's trade with member countries, on average across sectors. The effect, however, is heterogeneous across sectors. Finally, the paper finds no evidence of trade-diversion effects.
I. I ntroduction
The number of preferential trade agreements (PTAs) between low-income countries—so-called South-Southtrade agreements—, has increased dramatically in the last decade. Indeed, between 1990 and 2003, low-income countries signed 70 new PTAs ( WTO, 2003 ). South-South arrangements account for more than 50 percent of all new trade agreements. Important examples of such arrangements include the Southern Cone Common Market (MERCOSUR) in South America and the Common Market for Eastern and Southern Africa (COMESA) in Africa. Countries that are both