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Does Regionalism Affect Trade Liberalization toward NonMembers?

  • Antoni Estevadeordal

    (Inter-American Development Bank)

  • Caroline Freund

    (World Bank)

  • Emanuel Ornelas

    (London School of Economics)

We examine the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation (MFN) tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. We find that preferential tariff reduction in a given sector leads to a reduction in the external (MFN) tariff in that sector. External liberalization is greater if preferences are granted to important suppliers. However, these "complementarity effects" of preferential liberalization on external liberalization do not arise in customs unions. Overall, our results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded. (c) 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 123 (2008)
Issue (Month): 4 (November)
Pages: 1531-1575

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Handle: RePEc:tpr:qjecon:v:123:y:2008:i:4:p:1531-1575
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