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Does Regionalism Affect Trade Liberalization Towards Non-Members?

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Author Info
Antoni Estevadeordal
Caroline Freund
Emanuel Ornelas

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Abstract

We examine the effect of regionalism on unilateral trade liberalization using industry-level data onapplied MFN tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001.We find that preferential tariff reduction in a given sector leads to a reduction in the external (MFN)tariff in that sector. External liberalization is greater if preferences are granted to important suppliers.However, these "complementarity effects" of preferential liberalization on external liberalization donot arise in customs unions. Overall, our results suggest that concerns about a negative effect ofpreferential liberalization on external trade liberalization are unfounded.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0868.

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Date of creation: May 2008
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Handle: RePEc:cep:cepdps:dp0868

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Keywords: regionalism; external tariffs; trade liberalization;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F15 - International Economics - - Trade - - - Economic Integration

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References listed on IDEAS
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  2. Mohamed Hedi Bchir & Sébastien Jean & David Laborde, 2006. "Binding Overhang and Tariff-Cutting Formulas," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 207-232, July. [Downloadable!] (restricted)
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  3. Cadot, O. & De Melo, J. & Olarreaga, M., 1996. "Regional Integration and Lobbying for Tariffs Against Non-Members," University of Geneva Economics Working Papers 96.07, University of Geneva, Department of Political Economy.
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  4. Carsten Kowalczyk & Donald Davis, 1996. "Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA," NBER Working Papers 5421, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Bohara, Alok K. & Gawande, Kishore & Sanguinetti, Pablo, 2004. "Trade diversion and declining tariffs: evidence from Mercosur," Journal of International Economics, Elsevier, vol. 64(1), pages 65-88, October. [Downloadable!] (restricted)
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  6. Bhagwati, J. & Panagariya, A., 1996. "Preferential Trading Areas and Multilateralism: Strangers, Friends or Foes?," Discussion Papers 1996_09, Columbia University, Department of Economics.
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  22. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Giovanni Facchini & Peri A. Silva & Gerald Willmann, 2008. "The Customs Union Issue: Why do we Observe so few of them?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Hector Calvo-Pardo & Caroline Freund & Emanuel Ornelas, 2009. "The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers," CEP Discussion Papers dp0930, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  3. Saggi, Kamal & Yildiz, Halis Murat, 2009. "Bilateralism, multilateralism, and the quest for global free trade," MPRA Paper 17558, University Library of Munich, Germany. [Downloadable!]
  4. Raymond Robertson & Antoni Estevadeordal., 2009. "Gravity, Bilateral Agreements, and Trade Diversion in the Americas," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(133), pages 3-33. [Downloadable!]
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