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Third‐country Effects of Regional Trade Agreements

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  • Caroline Freund

Abstract

Does regionalism negatively impact non-members? To answer this question, we examine the effect of regional trade agreements (RTAs) on imports from non‐members and the tariffs that they face. Using data from six RTAs in Latin America and Europe, we do not find evidence that implementation of the regional agreements is associated with trade diversion from third countries to regional members. Using detailed industry data on preference margins and most‐favoured nation (MFN) tariffs for three trade agreements in Latin America over 12 years, we find that greater preference margins do not significantly reduce imports from third countries. We also look at the effect of preferences on external tariffs. We find evidence that preferential tariff reduction tends to precede the reduction of external MFN tariffs in a given sector, offering evidence of tariff complementarity. Overall, the results suggest that regionalism does not significantly harm non‐members.

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  • Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
  • Handle: RePEc:bla:worlde:v:33:y:2010:i:11:p:1589-1605
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    File URL: http://hdl.handle.net/10.1111/j.1467-9701.2010.01283.x
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    1. Mavroidis, Petros, 2007. "Trade in Goods," OUP Catalogue, Oxford University Press, number 9780199239030.
    2. Caroline Lesser, 2007. "Do Bilateral and Regional Approaches for Reducing Technical Barriers to Trade Converge Towards the Multilateral Trading System?," OECD Trade Policy Papers 58, OECD Publishing.
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