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Are Trade Blocs Building or Stumbling Blocks? New Evidence

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  • Baldwin, Richard
  • Seghezza, Elena

Abstract

The stumbling-block argument asserts that regionalism hinders MFN tariff cutting. If this was of first-order importance over previous decades, we should see a negative relationship between the level of MFN and preferential tariffs, i.e. MFN and PTA tariffs should be substitutes. Using tariff line data for 23 large trading nations (over one million observations) we find exactly the opposite. MFN and PTA tariffs are complements, not substitutes since margins of preferences tend to be low or zero for products where nations apply high MFN tariffs. One interpretation is that regionalism is neither a building nor a stumbling block. Sectoral vested interests are a ‘third factor’ that generates the positive correlation between MFN and PTA tariff levels.

Suggested Citation

  • Baldwin, Richard & Seghezza, Elena, 2007. "Are Trade Blocs Building or Stumbling Blocks? New Evidence," CEPR Discussion Papers 6599, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6599
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    Citations

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    Cited by:

    1. Fugazza, Marco & Nicita, Alessandro, 2011. "Measuring preferential market access," MPRA Paper 38565, University Library of Munich, Germany.
    2. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
    3. Ando, Mitsuyo & Estevadeordal, Antoni & Volpe Martincus, Christian, 2009. "Complements or Substitutes? Preferential and Multilateral Trade Liberalization at the Sectoral Level," Working Papers on Regional Economic Integration 39, Asian Development Bank.
    4. Marco Fugazza & Frédéric Robert-Nicoud, 2012. "The ‘Emulator Effect’ Of The Uruguay Round On United States Regionalism," UNCTAD Blue Series Papers 51, United Nations Conference on Trade and Development.
    5. Antoni Estevadeordal & Christian Volpe Martincus & Mitsuyo Ando, 2009. "Complements or Substitutes?: Preferential and Multilateral Trade Liberalization at the Sectoral Level," IDB Publications (Working Papers) 9332, Inter-American Development Bank.
    6. Simo Regis Y., 2013. "Integrating African Markets into the Global Exchange of Services: A Central African Perspective," The Law and Development Review, De Gruyter, vol. 6(2), pages 255-297, September.
    7. Fugazza, Marco & Nicita, Alessandro, 2013. "The direct and relative effects of preferential market access," Journal of International Economics, Elsevier, vol. 89(2), pages 357-368.

    More about this item

    Keywords

    Building blocks; Political economy of tariffs; Regionalism; Stumbling blocks;

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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