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Are Trade Blocs Building or Stumbling Blocks? New Evidence

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  • Baldwin, Richard
  • Seghezza, Elena

Abstract

The stumbling-block argument asserts that regionalism hinders MFN tariff cutting. If this was of first-order importance over previous decades, we should see a negative relationship between the level of MFN and preferential tariffs, i.e. MFN and PTA tariffs should be substitutes. Using tariff line data for 23 large trading nations (over one million observations) we find exactly the opposite. MFN and PTA tariffs are complements, not substitutes since margins of preferences tend to be low or zero for products where nations apply high MFN tariffs. One interpretation is that regionalism is neither a building nor a stumbling block. Sectoral vested interests are a ‘third factor’ that generates the positive correlation between MFN and PTA tariff levels.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6599.

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Date of creation: Dec 2007
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Handle: RePEc:cpr:ceprdp:6599

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Keywords: Building blocks; Political economy of tariffs; Regionalism; Stumbling blocks;

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Cited by:
  1. Fugazza, Marco & Nicita, Alessandro, 2011. "Measuring preferential market access," MPRA Paper 38565, University Library of Munich, Germany.
  2. Fugazza, Marco & Nicita, Alessandro, 2013. "The direct and relative effects of preferential market access," Journal of International Economics, Elsevier, vol. 89(2), pages 357-368.
  3. Antoni Estevadeordal & Christian Volpe Martincus & Mitsuyo Ando, 2009. "Complements or Substitutes?: Preferential and Multilateral Trade Liberalization at the Sectoral Level," IDB Publications 9332, Inter-American Development Bank.
  4. Marco Fugazza & Frédéric Robert-Nicoud, 2010. "The 'emulator effect' of the Uruguay round on US regionalism," LSE Research Online Documents on Economics 28723, London School of Economics and Political Science, LSE Library.
  5. Ando, Mitsuyo & Estevadeordal, Antoni & Volpe Martincus, Christian, 2009. "Complements or Substitutes? Preferential and Multilateral Trade Liberalization at the Sectoral Level," Working Papers on Regional Economic Integration 39, Asian Development Bank.
  6. Marco Fugazza & Frédéric Robert-Nicoud, 2012. "The ‘Emulator Effect’ Of The Uruguay Round On United States Regionalism," UNCTAD Blue Series Papers 51, United Nations Conference on Trade and Development.

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