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The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union

In: Policy Externalities and International Trade Agreements

Author

Listed:
  • Baybars Karacaovali
  • Nuno Limão

Abstract

Preferential trade agreements (PTAs) are characterized by liberalization with respect to only a few partners and thus they can potentially clash with, and retard multilateral trade liberalization (MTL). Yet there is almost no systematic evidence on whether the numerous existing PTAs actually affect MTL. We provide a model showing that PTAs hinder MTL unless they entail accession to a customs union with internal transfers. Using product-level tariffs negotiated by the European Union (EU) in the last two multilateral trade rounds we find that several of its PTAs have clashed with its MTL. However, this effect is absent for EU accessions. Moreover, we provide new evidence on the political economy determinants of trade policy in the EU.

Suggested Citation

  • Baybars Karacaovali & Nuno Limão, 2018. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 14, pages 373-401, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813147980_0014
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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