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Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion?

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  • Juyoung Cheong
  • Do Won Kwak
  • Kam Ki Tang

Abstract

type="main"> This paper investigates how pre-existing preferential trade agreements (PTAs) dilute the trade creation effect and shield the trade diversion effect of new PTAs. Countries having pre-existing PTAs enjoy smaller gains in intra-bloc trade because of the dilution effect and experience smaller losses or even gains in extra-bloc trade because of the shielding effect. The findings support the proposition that PTAs could be used to fend off future trade diversion.

Suggested Citation

  • Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2015. "Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion?," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 221-238, May.
  • Handle: RePEc:bla:reviec:v:23:y:2015:i:2:p:221-238
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    Cited by:

    1. Engler, Philipp & Tervala, Juha, 2018. "Welfare effects of TTIP in a DSGE model," Economic Modelling, Elsevier, vol. 70(C), pages 230-238.
    2. Rahul Sen & Sadhana Srivastava & Don J Webber, 2015. "Effects of preferential trade agreements in the presence of zero trade flows: the cases of China and India," Working Papers 20151507, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    3. Cheong Juyoung & Takayama Shino, 2016. "A Trade and Welfare Analysis of Tariff Changes Within the TPP," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 477-511, January.
    4. Rahul Sen & Sadhana Srivastava & Don Webber, 2015. "Preferential trading agreements and the gravity model in presence of zero and missing trade flows: Early results for China and India," Working Papers 2015-02, Auckland University of Technology, Department of Economics.
    5. Cheong, Juyoung & Kwak, Do Won & Tang, Kam Ki, 2015. "Heterogeneous Effects of Preferential Trade Agreements: How does Partner Similarity Matter?," World Development, Elsevier, vol. 66(C), pages 222-236.
    6. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2014. "A Within Estimator for Three-Level Data: An Application to the WTO Effect on Trade Flows," Discussion Papers Series 501, School of Economics, University of Queensland, Australia.
    7. Cheong, Juyoung & Kwak, Do Won & Tang, Kam Ki, 2018. "The trade effects of tariffs and non-tariff changes of preferential trade agreements," Economic Modelling, Elsevier, vol. 70(C), pages 370-382.

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