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Regional Trade Agreements

  • Caroline Freund
  • Emanuel Ornelas

    ()

    (World Bank, Washington, DC 20433
    London School of Economics, London, WC2A 2AE United Kingdom)

This article reviews the theoretical and the empirical literature on regionalism. The formation of regional trade agreements has been, by far, the most popular form of reciprocal trade liberalization in the past 15 years. The discriminatory character of these agreements has raised three main concerns: that trade diversion would be rampant, because special interest groups would induce governments to form the most distortionary agreements; that broader external trade liberalization would stall or reverse; and that multilateralism could be undermined. Theoretically, all these concerns are legitimate, although there are also several theoretical arguments that oppose them. Empirically, neither widespread trade diversion nor stalled external liberalization has materialized, whereas the undermining of multilateralism has not been properly tested. There are also several aspects of regionalism that have received too little attention from researchers, but which are central to understanding its causes and consequences.

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File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.economics.102308.124455
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Article provided by Annual Reviews in its journal Annual Review of Economics.

Volume (Year): 2 (2010)
Issue (Month): 1 (09)
Pages: 139-166

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Handle: RePEc:anr:reveco:v:2:y:2010:p:139-166
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  1. Pabo Sanguinetti & Alok Bohara & Kishore Guatanabe, 2003. "Trade Diverion and Declinning Tariffs: Evidence from MERCOSUR," Department of Economics Working Papers 003, Universidad Torcuato Di Tella.
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  3. Foley, C. Fritz & Antras, Pol, 2009. "Regional Trade Integration and Multinational Firm Strategies," Scholarly Articles 3374522, Harvard University Department of Economics.
  4. Baybars Karacaovali & Nuno Limao, 2005. "The Clash Of Liberalizations: Preferential Vs. Multilateral Trade Liberalization In The European Union," International Trade and Finance Association Conference Papers 1037, International Trade and Finance Association.
  5. Abrego, Lisandro & Riezman, Raymond & Whalley, John, 2006. "How often are propositions on the effects of regional trade agreements theoretical curiosa?," Journal of International Economics, Elsevier, vol. 68(1), pages 59-78, January.
  6. Eric W. Bond & Raymond G. Riezman & Constantinos Syropoulos, 2013. "A strategic and welfare theoretic analysis of free trade areas," World Scientific Book Chapters, in: International Trade Agreements and Political Economy, chapter 8, pages 101-127 World Scientific Publishing Co. Pte. Ltd..
  7. 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.
  8. Mark Melatos & Alan Woodland, 2009. "Common External Tariff Choice in Core Customs Unions," Review of International Economics, Wiley Blackwell, vol. 17(SI), pages 292-303, 05.
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