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Do South–South preferential trade agreements undermine the prospects for multilateral free trade?

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  • Paul Missios
  • Halis Murat Yildiz

Abstract

Due to trade diversion, there have been concerns expressed over the proliferation of preferential trade agreements (PTAs) that include South countries. In this paper, we compare welfare across different geographic configurations of bilateral free trade agreements (FTAs) and customs unions (CUs) and examine their implications for the stability of multilateral free trade. While North–North PTAs do tend to yield higher global welfare than South–South PTAs, a single South–South FTA may make free trade more sustainable than any other single agreement. With pre‐existing North–North agreements and a large enough cost asymmetry between regions, an additional South member or a new South–South agreement always makes free trade harder to sustain. Est‐ce que les accords commerciaux préférentiels sud‐sud minent les prospectives d’un libre‐échange multilatéral? À cause de ses effets de diversion du commerce, certaines inquiétudes ont été exprimées à propos de la prolifération des accords commerciaux préférentiels (ACP) impliquant les pays du sud. Dans ce mémoire, on compare le niveau de bien‐être entre les différentes configurations géographiques d’accords bilatéraux de libre‐échange (ALE) et d’unions douanières, et on examine leurs implications pour la stabilité des accords de libre‐échange multilatéraux. Alors que les ACP nord‐nord tendent à engendrer des niveaux globaux de bien‐être plus élevés que les ACP sud‐sud, un seul ALE sud‐sud peut rendre le libre‐échange plus soutenable que tout autre simple accord. Compte tenu des accords nord‐nord préexistants, et des forts coûts de l’asymétrie entre régions, l’addition d’un membre du sud ou un nouvel accord sud‐sud rendent toujours le libre‐échange plus difficile à soutenir.

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  • Paul Missios & Halis Murat Yildiz, 2017. "Do South–South preferential trade agreements undermine the prospects for multilateral free trade?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(1), pages 111-161, February.
  • Handle: RePEc:wly:canjec:v:50:y:2017:i:1:p:111-161
    DOI: 10.1111/caje.12253
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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