Competitive Liberalization or Competitive Diversion? The Relationship between Preferential Trade Agreements and the Multilateral Trading System

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Competitive Liberalization or Competitive Diversion? The Relationship between Preferential Trade Agreements and the Multilateral Trading System

Author Info

Soamiely Andriamananjara (USITC)

Abstract

This article discusses whether the current proliferation of preferential trade agreements-the so-called "competitive liberalization"-encourages evolution toward multilateral free trade. It argues that countries pursuing preferential trade initiatives are in pursuit of the economic rents resulting from the trade diversion associated with trade preference (or discrimination). By lowering the margin of preference, multilateral trade liberalization reduces those rents and is likely to be resisted by members of trade-diverting preferential blocs. Future preferential agreements should be designed to be less trade diverting in order to be more compatible with the objective of global free trade.

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Paper provided by EconWPA in its series International Trade with number 0305002.

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Length: 14 pages
Date of creation: 09 May 2003
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Handle: RePEc:wpa:wuwpit:0305002

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Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F15 - International Economics - - Trade - - - Economic Integration
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-05-15 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Bhagwati, J. & Panagariya, A., 1996. "Preferential Trading Areas and Multilateralism: Strangers, Friends or Foes?," Discussion Papers 1996_09, Columbia University, Department of Economics.
Baldwin, Richard, 1993. "A Domino Theory of Regionalism," CEPR Discussion Papers 857, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Pravin Krishna, 1998. "Regionalism And Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 227-250, February. [Downloadable!] (restricted)
Other versions:
- Pravin Krishna, . "Regionalism and Multilaterialism: A Political Economy Approach," Working Papers 96-5, Brown University, Department of Economics. [Downloadable!]
Anne O. Krueger, 1999. "Are Preferential Trading Arrangements Trade-Liberalizing or Protectionist?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 105-124, Fall. [Downloadable!] (restricted)

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