IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/4751.html
   My bibliography  Save this paper

Does regionalism affect trade liberalization toward non-members ?

Author

Listed:
  • Estevadeordal, Antoni
  • Freund, Caroline
  • Ornelas, Emanuel

Abstract

This paper examines the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. The findings show that preferential tariff reduction in a given sector leads to a reduction in the external (most-favored nation) 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 do not arise in customs unions. Overall, the results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded.

Suggested Citation

  • Estevadeordal, Antoni & Freund, Caroline & Ornelas, Emanuel, 2008. "Does regionalism affect trade liberalization toward non-members ?," Policy Research Working Paper Series 4751, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4751
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2008/10/14/000158349_20081014133207/Rendered/PDF/WPS4751.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert Staiger, 1994. "A Theory of Gradual Trade Liberalization," International Trade 9410003, University Library of Munich, Germany, revised 21 Oct 1994.
    2. Kamal Saggi & Halis Murat Yildiz, 2018. "Bilateral Trade Agreements and the Feasibility of Multilateral Free Trade," World Scientific Book Chapters, in: Kamal Saggi (ed.), Economic Analysis of the Rules and Regulations of the World Trade Organization, chapter 8, pages 168-185, World Scientific Publishing Co. Pte. Ltd..
    3. Giovanni Maggi & Andrés Rodríguez-Clare, 2007. "A Political-Economy Theory of Trade Agreements," American Economic Review, American Economic Association, vol. 97(4), pages 1374-1406, September.
    4. Pravin Krishna, 1996. "Regionalism and Multilateralism: A Political Economy Approach," Working Papers 96-5, Brown University, Department of Economics.
    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.
    6. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    7. Schiff, Maurice & Winters, L Alan, 1998. "Regional Integration as Diplomacy," The World Bank Economic Review, World Bank, vol. 12(2), pages 271-295, May.
    8. Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. "Trade Agreements as Endogenously Incomplete Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 394-419, March.
    9. Olarreaga, Marcelo & Soloaga, Isidro, 1998. "Endogenous Tariff Formation: The Case of Mercosur," The World Bank Economic Review, World Bank, vol. 12(2), pages 297-320, May.
    10. Joseph Francois & Bernard Hoekman & Miriam Manchin, 2006. "Preference Erosion and Multilateral Trade Liberalization," The World Bank Economic Review, World Bank, vol. 20(2), pages 197-216.
    11. World Bank, 2005. "Global Economic Prospects 2005 : Trade, Regionalism and Development," World Bank Publications - Books, The World Bank Group, number 14783, December.
    12. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, vol. 73(1), pages 1-30, September.
    13. Mohamed Hedi Bchir & Sébastien Jean & David Laborde, 2006. "Binding Overhang and Tariff-Cutting Formulas," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(2), pages 207-232, July.
    14. Cadot, Olivier & de Melo, Jaime & Olarraga, Marcelo, 1999. "Regional Integration and Lobbying for Tariffs against Nonmembers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 635-657, August.
    15. Kyle Bagwell & Robert W. Staiger, 1999. "Regionalism and Multilateral Tariff Co-operation," International Economic Association Series, in: John Piggott & Alan Woodland (ed.), International Trade Policy and the Pacific Rim, chapter 7, pages 157-190, Palgrave Macmillan.
    16. Maurice Schiff & L. Alan Winters, 2003. "Regional Integration and Development," World Bank Publications - Books, The World Bank Group, number 15172, December.
    17. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    18. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
    19. Eric W. Bond & Raymond G. Riezman & Constantinos Syropoulos, 2013. "A strategic and welfare theoretic analysis of free trade areas," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 8, pages 101-127, World Scientific Publishing Co. Pte. Ltd..
    20. Baybars Karacaovali & Nuno Limão, 2018. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 14, pages 373-401, World Scientific Publishing Co. Pte. Ltd..
    21. Nuno Limão, 2018. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 13, pages 353-371, World Scientific Publishing Co. Pte. Ltd..
    22. Carsten Kowalczyk & Donald R. Davis, 1998. "Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA," NBER Chapters, in: The Regionalization of the World Economy, pages 227-258, National Bureau of Economic Research, Inc.
    23. Furusawa, Taiji & Lai, Edwin L. -C., 1999. "Adjustment costs and gradual trade liberalization," Journal of International Economics, Elsevier, vol. 49(2), pages 333-361, December.
    24. Foroutan, Faezeh, 1998. "Does membership in a regional preferential trade arrangement make a country more or less protectionist?," Policy Research Working Paper Series 1898, The World Bank.
    25. P. Magee, Stephen & Lee, Hak-Loh, 2001. "Endogenous tariff creation and tariff diversion in a customs union," European Economic Review, Elsevier, vol. 45(3), pages 495-518, March.
    26. Martin Richardson, 2017. "Endogenous Protection and Trade Diversion," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 5, pages 107-127, World Scientific Publishing Co. Pte. Ltd..
    27. Syropoulos, Constantinos, 1999. "Customs Unions and Comparative Advantage," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 239-266, April.
    28. Arvind Panagariya & Jagdish Bhagwati, 1999. "Preferential Trading Areas and Multilateralism: Strangers, Friends or Foes?," World Scientific Book Chapters, in: Regionalism In Trade Policy Essays on Preferential Trading, chapter 2, pages 47-111, World Scientific Publishing Co. Pte. Ltd..
    29. Ornelas, Emanuel, 2005. "Trade creating free trade areas and the undermining of multilateralism," European Economic Review, Elsevier, vol. 49(7), pages 1717-1735, October.
    30. Pravin Krishna, 1998. "Regionalism and Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 227-251.
    31. Caroline L. Freund, 1998. "Multilateralism and the endogenous formation of PTAs," International Finance Discussion Papers 614, Board of Governors of the Federal Reserve System (U.S.).
    32. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-519, September.
    33. 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.
    34. Panagariya, Arvind & Findlay, Ronald & DEC, 1994. "A political - economy analysis of free trade areas and customs unions," Policy Research Working Paper Series 1261, The World Bank.
    35. Faezeh Foroutan, 1998. "Does Membership in a Regional Preferential Trade Arrangement Make a Country More or Less Protectionist?," The World Economy, Wiley Blackwell, vol. 21(3), pages 305-335, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    2. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    3. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
    4. Staiger, Robert & Bagwell, Kyle & Bown, Chad, 2015. "Is the WTO Passé?," CEPR Discussion Papers 10672, C.E.P.R. Discussion Papers.
    5. Ornelas, Emanuel, 2008. "Feasible multilateralism and the effects of regionalism," Journal of International Economics, Elsevier, vol. 74(1), pages 202-224, January.
    6. Kuenzel, David J. & Sharma, Rishi R., 2021. "Preferential trade agreements and MFN tariffs: Global evidence," European Economic Review, Elsevier, vol. 138(C).
    7. Richard Baldwin, 2008. "Big-Think Regionalism: A Critical Survey," NBER Working Papers 14056, National Bureau of Economic Research, Inc.
    8. Calvo-Pardo, Hector & Freund, Caroline & Ornelas, Emanuel, 2009. "The ASEAN free trade agreement : impact on trade flows and external trade barriers," Policy Research Working Paper Series 4960, The World Bank.
    9. Baybars Karacaovali, 2010. "Free Trade Agreements and External Tariffs," Fordham Economics Discussion Paper Series dp2010-03, Fordham University, Department of Economics.
    10. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    11. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
    12. Paul Missios & Halis Murat Yildiz, 2017. "Do SouthSouth preferential trade agreements undermine the prospects for multilateral free trade?," Canadian Journal of Economics, Canadian Economics Association, vol. 50(1), pages 111-161, February.
    13. Saggi, Kamal & Yildiz, Halis Murat, 2005. "Welfare effects of preferential trade agreements under optimal tariffs," MPRA Paper 17562, University Library of Munich, Germany.
    14. Emanuel Ornelas, 2012. "Preferential Trade Agreements and the Labor Market," CEP Discussion Papers dp1117, Centre for Economic Performance, LSE.
    15. Saggi, Kamal & Wong, Woan Foong & Yildiz, Halis Murat, 2019. "Should the WTO require free trade agreements to eliminate internal tariffs?," Journal of International Economics, Elsevier, vol. 118(C), pages 316-330.
    16. Baybars Karacaovali, 2016. "Trade-diverting free trade agreements, external tariffs, and feasibility," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(1), pages 1-22, February.
    17. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July.
    18. Baybars Karacaovali & Nuno Limão, 2018. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 14, pages 373-401, World Scientific Publishing Co. Pte. Ltd..
    19. Crivelli, Pramila, 2016. "Regionalism and falling external protection in high and low tariff members," Journal of International Economics, Elsevier, vol. 102(C), pages 70-84.
    20. repec:ilo:ilowps:469183 is not listed on IDEAS
    21. Karacaovali, Baybars & Limao, Nuno, 2005. "The clash of liberalizations : preferential versus multilateral trade liberalization in the European Union," Policy Research Working Paper Series 3493, The World Bank.

    More about this item

    Keywords

    Free Trade; Trade Policy; International Trade and Trade Rules; Trade and Regional Integration; Trade Law;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4751. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.