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Preferential trade agreements and their role in world trade

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  • Denis Medvedev

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Abstract

The author investigates the effects of preferential trade agreements (PTAs) on bilateral trade flows using a comprehensive database of PTAs in force and a detailed matrix of world trade. He shows that total trade between PTA partners is a poor proxy for preferential trade (trade in tariff lines where preferences are likely to matter): while the former amounted to one-third of global trade in 2000-02, the latter was between one-sixth and one-tenth of world trade. His gravity model estimates indicate that using total rather than preferential trade to assess the impact of PTAs leads to a significant downward bias in the PTA coefficient. The author finds that product exclusions and long phase-in periods significantly limit preferential trade, and their removal could more than double trade in tariff lines above 3 percent of most-favored-nation (MFN) duties. He also shows that the effects of PTAs on trade vary by type of agreement and are increasing in the incomes of PTA partners.

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Bibliographic Info

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 146 (2010)
Issue (Month): 2 (June)
Pages: 199-222

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Handle: RePEc:spr:weltar:v:146:y:2010:i:2:p:199-222

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Related research

Keywords: Preferential trade agreements; Gravity model; F13; F15; F53;

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References

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Citations

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Cited by:
  1. Kazunobu Hayakawa & Fukunari Kimura & Kaoru Nabeshima, 2014. "Nonconventional provisions in regional trade agreements: Do they enhance international trade?," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 113-138, May.
  2. Medvedev, Denis, 2006. "Beyond trade : the impact of preferential trade agreements on foreign direct investment inflows," Policy Research Working Paper Series 4065, The World Bank.
  3. Florian Mölders & Ulrich Volz, 2011. "Trade creation and the status of FTAs: empirical evidence from East Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(3), pages 429-456, September.
  4. Hayakawa, Kazunobu, 2012. "Impacts of FTA utilization on firm performance," IDE Discussion Papers 366, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  5. Raimondi, Valentina & Scoppola, Margherita & Olper, Alessandro, 2011. "Preference erosion and the developing countries exports to the EU: a dynamic panel gravity approach," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103391, Agricultural and Applied Economics Association.
  6. Neil Foster-McGregor & Robert Stehrer, 2010. "Preferential Trade Agreements and the Structure of International Trade," wiiw Working Papers 61, The Vienna Institute for International Economic Studies, wiiw.
  7. Elisa Gamberoni, 2007. "Do unilateral trade preferences help export diversification? An investigation of the impact of European unilateral trade preferences on the extensive and intensive margin of trade," IHEID Working Papers 17-2007, Economics Section, The Graduate Institute of International Studies.
  8. Omar S. Dahi & Firat Demir, 2013. "Preferential trade agreements and manufactured goods exports: does it matter whom you PTA with?," Applied Economics, Taylor & Francis Journals, vol. 45(34), pages 4754-4772, December.
  9. Mikic, Mia, 2007. "Preferential trade agreements and agricultural trade liberalization in Asia and the Pacific," MPRA Paper 2947, University Library of Munich, Germany.
  10. Francisco Callado-Muñoz & Jana Hromcová & Natalia Utrero-González, 2014. "Openness and Technology Diffusion in Payment Systems: The Case of NAFTA," Computational Economics, Society for Computational Economics, vol. 43(4), pages 497-519, April.
  11. Neil Foster-McGregor & Johannes Pöschl & Robert Stehrer, 2010. "The Impact of Preferential Trade Agreements on the Margins of International Trade," wiiw Working Papers 70, The Vienna Institute for International Economic Studies, wiiw.
  12. Cipollina, Maria & Salvatici, Luca, 2007. "EU and developing countries: an analysis of preferential margins on agricultural trade flows," Working Papers 7219, TRADEAG - Agricultural Trade Agreements.
  13. Aradhna Aggarwal, 2010. "Regional Economic Integration and FDI in South Asia : Prospects and Problems," Working Papers id:2691, eSocialSciences.
  14. Hayakawa, Kazunobu & Kimura, Fukunari, 2014. "How do free trade agreements reduce tariff rates and non-tariff barriers?," IDE Discussion Papers 446, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  15. Medvedev, Denis, 2012. "Beyond Trade: The Impact of Preferential Trade Agreements on FDI Inflows," World Development, Elsevier, vol. 40(1), pages 49-61.

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