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Regional Trade Agreements

Author

Listed:
  • Caroline Freund
  • Emanuel Ornelas

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

Abstract

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.

Suggested Citation

  • Caroline Freund & Emanuel Ornelas, 2010. "Regional Trade Agreements," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 139-166, September.
  • Handle: RePEc:anr:reveco:v:2:y:2010:p:139-166
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.economics.102308.124455
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    References listed on IDEAS

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    1. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    2. 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..
    3. 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.
    4. Lisandro Abrego & Raymond Riezman & John Whalley, 2013. "How often are propositions on the effects of regional trade agreements theoretical curiosa?," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 9, pages 129-148 World Scientific Publishing Co. Pte. Ltd..
    5. 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, May.
    6. Karacaovali, Baybars & Limão, Nuno, 2008. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," Journal of International Economics, Elsevier, vol. 74(2), pages 299-327, March.
    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. Pol Antràs & C. Fritz Foley, 2009. "Regional Trade Integration and Multinational Firm Strategies," NBER Working Papers 14891, National Bureau of Economic Research, Inc.
    9. Jeffrey H. Bergstrand & Peter Egger & Mario Larch, 2016. "Economic Determinants Of The Timing Of Preferential Trade Agreement Formations And Enlargements," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 315-341, January.
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    More about this item

    Keywords

    regionalism; trade creation; trade diversion; external tariffs; trade liberalization;

    JEL classification:

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

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