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Preferential Trade Liberalization: The Traditional Theory and New Developments

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  • Arvind Panagariya

Abstract

This paper begins by systematically developing the "static" theory of preferential trade areas (PTAs) and showing that neither a large volume of initial intra-union trade nor geographical proximity can serve as a guide to welfare enhancing PTAs. The paper then discusses the modern literature addressing welfare effects of simultaneous division of the world into many PTAs, the impact of the decision to form a PTA on external tariffs and the "dynamic" time-path question of whether PTAs are building blocks or stumbling blocks towards multilateral freeing of trade. A final section discusses key theoretical considerations in the empirical evaluation of PTAs.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.38.2.287
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 38 (2000)
Issue (Month): 2 (June)
Pages: 287-331

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Handle: RePEc:aea:jeclit:v:38:y:2000:i:2:p:287-331

Note: DOI: 10.1257/jel.38.2.287
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  1. Berglas, Eitan, 1979. "Preferential Trading Theory: The n Commodity Case," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 315-31, April.
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  8. Jiandong Ju & Kala Krishna, 2005. "Firm behaviour and market access in a Free Trade Area with rules of origin," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 290-308, February.
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  11. Bhagwati, Jagdish & Greenaway, David & Panagariya, Arvind, 1998. "Trading Preferentially: Theory and Policy," Economic Journal, Royal Economic Society, vol. 108(449), pages 1128-48, July.
  12. Rod Falvey & Geoff Reed, 2002. "Rules of Origin as Commercial Policy Instruments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 393-408, May.
  13. Andriamananjara, Soamiely, 1999. "On the size and number of regional integration arrangements - a political economy model," Policy Research Working Paper Series 2117, The World Bank.
  14. Bhagwati, Jagdish N, 1971. "Trade-Diverting Customs Unions and Welfare Improvement: a Clarification," Economic Journal, Royal Economic Society, vol. 81(323), pages 580-87, September.
  15. Fernandez, Raquel & Portes, Jonathan, 1998. "Returns to Regionalism: An Analysis of Nontraditional Gains from Regional Trade Agreements," World Bank Economic Review, World Bank Group, vol. 12(2), pages 197-220, May.
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