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Do Trade Agreements Stimulate International Trade Differently? Evidence from 296 Trade Agreements

  • Tristan Kohl
  • Steven Brakman
  • Harry Garretsen

In a seminal paper, Rose (2004) found that the assumed positive impact of the WTO on international trade was questionable. This finding has been scrutinized and modified in subsequent research, using different datasets, econometric methods and separating the WTO from other forms of trade agreements. A key characteristic of this literature is the rather simplistic way in which trade agreements are treated whereby all trade agreements are lumped together. Trade agreements come, however, in many different forms and shapes. This paper addresses these differences in trade agreements. Using a unique database of 296 trade agreements, we distinguish 17 trade-related policy domains, 9 indicators of institutional quality and indicate whether the agreements contain legally enforceable commitments. This extensive and novel taxonomy of trade agreements enables us to allow for the possible heterogeneity of the impact of trade agreements on international trade. Using a gravity model, we find that trade agreement heterogeneity indeed matters for international trade, both positively and negatively.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4243.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4243
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  1. Andrew K. Rose, 2002. "Do We Really KNow that the WTO Increases Trade?," Working Papers 182002, Hong Kong Institute for Monetary Research.
  2. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
  3. Felbermayr, Gabriel & Kohler, Wilhelm K., 2006. "Exploring the intensive and extensive margins of world trade," Munich Reprints in Economics 20610, University of Munich, Department of Economics.
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  5. Pravin Krishna, . "Regionalism and Multilaterialism: A Political Economy Approach," Working Papers 96-5, Brown University, Department of Economics.
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  7. Baccini, Leonardo & Dür, Andreas & Elsig, Manfred & Milewicz, Karolina, 2011. "The design of preferential trade agreements: A new dataset in the Making," WTO Staff Working Papers ERSD-2011-10, World Trade Organization (WTO), Economic Research and Statistics Division.
  8. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  9. Richard E. Baldwin, 1997. "The Causes of Regionalism," The World Economy, Wiley Blackwell, vol. 20(7), pages 865-888, November.
  10. Chang, Pao-Li & Lee, Myoung-Jae, 2011. "The WTO trade effect," Journal of International Economics, Elsevier, vol. 85(1), pages 53-71, September.
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  12. Marie-France Houde & Akshay Kolse-Patil & Sébastien Miroudot, 2007. "The Interaction between Investment and Services Chapters in Selected Regional trade Agreements," OECD Trade Policy Papers 55, OECD Publishing.
  13. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
  14. Scott L. Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2002. "How important are capital and total factor productivity for economic growth?," Working Paper 2002-2, Federal Reserve Bank of Atlanta.
  15. Fink, Carsten & Molinuevo, Martín, 2008. "East Asian preferential trade agreements in services: liberalization content and WTO rules," World Trade Review, Cambridge University Press, vol. 7(04), pages 641-673, October.
  16. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
  17. Antoni Estevadeordal & Kati Suominen, 2008. "Sequencing Regional Trade Integration and Cooperation Agreements," The World Economy, Wiley Blackwell, vol. 31(1), pages 112-140, 01.
  18. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  19. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June.
  20. Bernhard Herz & Marco Wagner, 2011. "The ‘Real’ Impact of GATT/WTO – a Generalised Approach," The World Economy, Wiley Blackwell, vol. 34(6), pages 1014-1041, 06.
  21. Xuepeng Liu, 2009. "GATT/WTO Promotes Trade Strongly: Sample Selection and Model Specification," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 428-446, 08.
  22. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
  23. Jeffrey Kucik, 2012. "The Domestic Politics of Institutional Design: Producer Preferences over Trade Agreement Rules," Economics and Politics, Wiley Blackwell, vol. 24(2), pages 95-118, 07.
  24. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
  25. Molly Lesher & Sébastien Miroudot, 2006. "Analysis of the Economic Impact of Investment Provisions in Regional Trade Agreements," OECD Trade Policy Papers 36, OECD Publishing.
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