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Do Preferential Trade Agreements Favor the Liberalization of Trade with Non-Members? The Case of the Andean Community

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  • Lakshmi Isabel Castillo Thorne

    (Pontifical Catholic University of Peru, Lima, Peru)

Abstract

The theoretical literature has not reached a consensus on the effect of preferential trade agreements(PTAs) on multilateral liberalization. Empirical studies on this topic have been limited and, liketheoretical studies, yield varying results. This study seeks to identify the effect of the Andean Community of Nations (CAN) on Peru’s multilateral trade liberalization by analyzing the variationin Most Favored Nation (MFN) tariffs imposed on non-members as a consequence of preferentialtariff reductions for PTA members. The units of analysis are tariff lines disaggregated to 6 digitsin the Harmonized System for 1992–2010. The results show that, for the entire period, the CAN generated a building block. We divided the sample into two sub-periods: 1992-2001 and 2002–2010. For the former the results show a building block effect, while for the latter they suggest theformation of a stumbling block. Other variables are also considered, such as preferential imports,as a sizeable preferential margin may reduce MFN tariffs for the entire sample. Based on theseresults, we find that the CAN did not hinder Peru’s multilateral liberalization

Suggested Citation

  • Lakshmi Isabel Castillo Thorne, 2021. "Do Preferential Trade Agreements Favor the Liberalization of Trade with Non-Members? The Case of the Andean Community," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 44(88), pages 23-44.
    • Handle: RePEc:pcp:pucrev:y:2021:i:88:p:23-44
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    File URL: https://revistas.pucp.edu.pe/index.php/economia/article/view/22904/23401
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    More about this item

    Keywords

    Preferential Trade Agreement (PTA); Peru; Andean Community;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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