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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.

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File URL: http://www.sciencedirect.com/science/article/B6V6D-50F8C3R-2/2/c1a69d0adf359b240b1d1057f913094f
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 82 (2010)
Issue (Month): 2 (November)
Pages: 238-248

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Handle: RePEc:eee:inecon:v:82:y:2010:i:2:p:238-248
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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

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Find related papers by JEL classification:
  • F15 - International Economics - - Trade - - - Economic Integration

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Cited by:

  1. Gianluca Orefice, 2012. "International Migration and Trade Agreements: the new role of PTAs," Working Papers 2012-15, CEPII research center.
  2. Bergstrand, Jeffrey H. & Egger, Peter, 2013. "What determines BITs?," Journal of International Economics, Elsevier, vol. 90(1), pages 107-122.
  3. Maggie Xiaoyang Chen & Sumit Joshi, 2010. "Third-Country Effects on the Formation of Free Trade Agreements," Working Papers 2008-16, The George Washington University, Institute for International Economic Policy.
  4. Katerina Gradeva & Dany Jaimovich, 2014. "Multilateral determinants of regionalism revisited," The Review of International Organizations, Springer, vol. 9(2), pages 163-203, June.
  5. Denise Konan & Keith E. Maskus, 2011. "Preferential Trade And Welfare With Differentiated Products," Working Papers 201101, University of Hawaii at Manoa, Department of Economics.
  6. 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.
  7. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2014. "Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion," Discussion Papers Series 500, School of Economics, University of Queensland, Australia.

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