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The Clash of Liberalizations: Preferential versus Multilateral Trade Liberalization in the European Union

Author Info

Listed author(s):
  • Baybars Karacaovali

    (Fordham University, Department of Economics)

  • Nuno Limao

    (University of Maryland, Department of Economics; NBER; CEPR)

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.

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Paper provided by Fordham University, Department of Economics in its series Fordham Economics Discussion Paper Series with number dp2008-02.

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Date of creation: 2008
Handle: RePEc:frd:wpaper:dp2008-02
Contact details of provider: Web page: http://www.fordham.edu/economics/
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More information through EDIRC

Keywords: Preferential trade agreements; customs unions; multilateral trade negotiations; MNF tariff concessions; reciprocity;

Other versions of this item:

Find related papers by JEL classification:
  • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
  • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • F15 - International Economics - - Trade - - - Economic Integration

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