Trade Potential and Among Indian Ocean Border Countries: Application of the Gravity Model

Recent development in the globalization process and interdependence of national economic follow the importance of financial market, economic liberalization policies, technology capital and laber mobility, expansion of consumption market. in this instance, economic integration, expanding trade flows, reduction of barriers and trade constraints are the main activities of national economies. looking towards to regional union, trade flows, integration could facilitate the process of trade liberalization to help the more cooperation between partners to inter national economics.the propose of this paper is two fold. first examine the succees and failure of the existing preferential trade agreements and regional economic groupings among the ior-arc countries. secondly using the generalized gravity model and panel data during 1999-2004, explains the estimation results.the results show that ior-arc potential trade including iran, while export to others excluding iran would increase lay 35 percent, would increase 20 percent. imports from nonmember could be 15 percent higher as the gravity model predicts.