Trade Creation and Trade Diversion between Tunisia and EU: Analysis by Gravity Model

Since the middle of nineties, there has been a great rise of free trade agreements (FTAs) between the North and South countries. Indeed, the objective of this article is to know if FTASbetween an ndustrialized region as Europe and a small country as Tunisia are capable of increasing exchanges among them and then improving the trade of the weakest country. Our aim is to know if agreements between industrial countries and developed countries are able to increase trade between them and therefore improve the trade of the less developed country. To answer to this question we evaluate the two effects of regional integration: trade creation and diversion trade. We obtain two main results: the first result is after five years of the agreement between Tunisia and Europe, there is no trade creation. The second result shows that the preferential agreement between the two partners does not generate trade diversion of imports. However, there is a trade diversion of exports.