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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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References

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Citations

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Cited by:
  1. Mikic, Mia, 2007. "Preferential trade agreements and agricultural trade liberalization in Asia and the Pacific," MPRA Paper 2947, University Library of Munich, Germany.
  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. Hayakawa, Kazunobu & Kimura, Fukunari & Nabeshima, Kaoru, 2011. "Non-conventional provisions in regional trade agreements : do they enhance international trade?," IDE Discussion Papers 309, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  4. Aradhna Aggarwal, 2010. "Regional Economic Integration and FDI in South Asia : Prospects and Problems," Working Papers id:2691, eSocialSciences.
  5. Neil Foster & 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.
  6. Neil Foster & 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. Demir, Firat & Dahi, Omar S., 2012. "Preferential Trade Agreements and Manufactured Goods Exports: Does It Matter Whom You PTA With?," MPRA Paper 37396, University Library of Munich, Germany.
  8. 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.
  9. 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.
  10. 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.
  11. Hayakawa, Kazunobu, 2012. "Impacts of FTA utilization on firm performance," IDE Discussion Papers 366, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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