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Preferential trade agreements and their role in world trade

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  • Medvedev, Denis

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

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4038.

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Date of creation: 01 Oct 2006
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Handle: RePEc:wbk:wbrwps:4038

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Keywords: Free Trade; Trade Law; Trade Policy; Economic Theory&Research; Trade and Services;

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Citations

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Cited by:
  1. Hayakawa, Kazunobu, 2012. "Impacts of FTA utilization on firm performance," IDE Discussion Papers, Institute of Developing Economies, Japan External Trade Organization(JETRO) 366, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  2. 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.
  3. 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, Economics Section, The Graduate Institute of International Studies 17-2007, Economics Section, The Graduate Institute of International Studies.
  4. 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.
  5. Aradhna Aggarwal, 2010. "Regional Economic Integration and FDI in South Asia : Prospects and Problems," Working Papers id:2691, eSocialSciences.
  6. 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, Society for Computational Economics, vol. 43(4), pages 497-519, April.
  7. Florian Mölders & Ulrich Volz, 2011. "Trade creation and the status of FTAs: empirical evidence from East Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 147(3), pages 429-456, September.
  8. Neil Foster & Robert Stehrer, 2011. "Preferential trade agreements and the structure of international trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 147(3), pages 385-409, September.
  9. Valentina Raimondi & Margherita Scoppola & Alessandro Olper, 2012. "Preference erosion and the developing countries exports to the EU: a dynamic panel gravity approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 148(4), pages 707-732, December.
  10. Mikic, Mia, 2007. "Preferential trade agreements and agricultural trade liberalization in Asia and the Pacific," MPRA Paper 2947, University Library of Munich, Germany.
  11. Hayakawa, Kazunobu & Kimura, Fukunari, 2014. "How do free trade agreements reduce tariff rates and non-tariff barriers?," IDE Discussion Papers, Institute of Developing Economies, Japan External Trade Organization(JETRO) 446, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  12. 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, Taylor & Francis Journals, vol. 45(34), pages 4754-4772, December.
  13. Medvedev, Denis, 2012. "Beyond Trade: The Impact of Preferential Trade Agreements on FDI Inflows," World Development, Elsevier, Elsevier, vol. 40(1), pages 49-61.
  14. Foster, Neil & Poeschl, Johannes & Stehrer, Robert, 2011. "The impact of Preferential Trade Agreements on the margins of international trade," Economic Systems, Elsevier, Elsevier, vol. 35(1), pages 84-97, March.
  15. Cipollina, Maria & Salvatici, Luca, 2007. "EU and developing countries: an analysis of preferential margins on agricultural trade flows," Working Papers, TRADEAG - Agricultural Trade Agreements 7219, TRADEAG - Agricultural Trade Agreements.

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