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Third-country effects on the formation of free trade agreements

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  • Chen, Maggie Xiaoyang
  • Joshi, Sumit

Abstract

The recent proliferation of free trade agreements (FTAs) has resulted in an increasingly complex network of preferential trading relationships. The economics literature has generally examined the formation of FTAs as a function of the participating countries' economic characteristics alone. In this paper, we show both theoretically and empirically that the decision to enter into an FTA is also crucially dependent on the participating countries' existing FTA relationships with third countries. Accounting for the interdependence of FTAs helps to explain a significant fraction of FTA formations that would not otherwise be predicted by countries' economic characteristics.

Suggested Citation

  • Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, vol. 82(2), pages 238-248, November.
  • Handle: RePEc:eee:inecon:v:82:y:2010:i:2:p:238-248
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    Citations

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    Cited by:

    1. Matthew Ryan & Flávio Menezes, 2015. "Public-private partnerships for transport infrastructure: Some efficiency risks," New Zealand Economic Papers, Taylor & Francis Journals, pages 276-295.
    2. Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, pages 238-248.
    3. Bergstrand, Jeffrey H. & Egger, Peter, 2013. "What determines BITs?," Journal of International Economics, Elsevier, pages 107-122.
    4. Gianluca Orefice, 2015. "International migration and trade agreements: The new role of PTAs," Canadian Journal of Economics, Canadian Economics Association, vol. 48(1), pages 310-334, February.
    5. Lake, James & Yildiz, Halis M., 2016. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Journal of International Economics, Elsevier, pages 213-233.
    6. Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, pages 238-248.
    7. Willert, Bianca, 2017. "How intermediates trade affects the formation of free trade agreements: A study analyzing pairwise trade flows of 70 countries," Thuenen-Series of Applied Economic Theory 147, University of Rostock, Institute of Economics.
    8. 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.
    9. repec:bla:ecinqu:v:55:y:2017:i:1:p:31-50 is not listed on IDEAS
    10. Osnago,Alberto & Rocha,Nadia & Ruta,Michele, 2015. "Deep trade agreements and vertical FDI : the devil is in the details," Policy Research Working Paper Series 7464, The World Bank.
    11. Angela Abbate & Luca De Benedictis & Giorgio Fagiolo & Lucia Tajoli, 2012. "The International Trade Network in Space and Time," LEM Papers Series 2012/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    12. Denise Eby Konan & Keith E. Maskus, 2012. "Preferential Trade and Welfare with Differentiated Products," Review of International Economics, Wiley Blackwell, pages 884-892.
    13. Bergstrand, Jeffrey H. & Egger, Peter, 2013. "What determines BITs?," Journal of International Economics, Elsevier, pages 107-122.
    14. Tan LI & Larry D. QIU, 2015. "Beyond Trade Creation: Free Trade Agreements and Trade Disputes," Working Papers DP-2015-28, Economic Research Institute for ASEAN and East Asia (ERIA).
    15. Katerina Gradeva & Dany Jaimovich, 2014. "Multilateral determinants of regionalism revisited," The Review of International Organizations, Springer, vol. 9(2), pages 163-203, June.

    More about this item

    Keywords

    Free trade agreements Third-country effect Loss sharing Concession erosion;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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