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Third-Country Effects on the Formation of Free Trade Agreements

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  • Maggie Xiaoyang Chen

    ()
    (Department of Economics/Institute for International Economic Policy, George Washington University)

  • Sumit Joshi

    ()
    (Department of Economics, George Washington University)

Abstract

The recent proliferation of free trade agreements (FTAs) has resulted in an in- creasingly complex network of preferential trading relationships. The economics literature has generally examined the formation of FTAs as a function of the par- ticipating countries' economic characteristics alone. In this paper, we show both theoretically and empirically that the decision to enter into an FTA is also crucially dependent on the participating countries' existing FTA relationships with third countries. Accounting for the interdependence of FTAs helps to explain a significant fraction of FTA formations that would not otherwise be predicted by countries' economic characteristics.

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Bibliographic Info

Paper provided by The George Washington University, Institute for International Economic Policy in its series Working Papers with number 2008-16.

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Length: 31 pages
Date of creation: Apr 2010
Date of revision:
Publication status: Forthcoming in Journal of International Economics
Handle: RePEc:gwi:wpaper:2008-16

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Keywords: free trade agreements; third-country e§ect; loss sharing; concession erosion;

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References

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Citations

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Cited by:
  1. Gianluca Orefice, 2012. "International Migration and Trade Agreements: the new role of PTAs," Working Papers 2012-15, CEPII research center.
  2. Bergstrand, Jeffrey H. & Egger, Peter, 2013. "What determines BITs?," Journal of International Economics, Elsevier, vol. 90(1), pages 107-122.
  3. Chen, Maggie & Joshi, Sumit, 2010. "Third-Country Effects on the Formation of Free Trade Agreements," MPRA Paper 23507, University Library of Munich, Germany.
  4. Angela Abbate & Luca De Benedictis & Giorgio Fagiolo & Lucia Tajoli, 2012. "The International Trade Network in Space and Time," LEM Papers Series 2012/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  5. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2014. "Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion," Discussion Papers Series 500, School of Economics, University of Queensland, Australia.
  6. Denise Konan & Keith E. Maskus, 2011. "Preferential Trade And Welfare With Differentiated Products," Working Papers 201101, University of Hawaii at Manoa, Department of Economics.

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