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Preferential Liberalization, Antidumping, and Safeguards: “Stumbling Block” Evidence from Mercosur

Listed author(s):
  • Chad P. Bown

    ()

    (Peterson Institute for International Economics)

  • Patricia Tovar

    ()

    (Pontificia Universidad Católica del Perú)

There is no consensus in the literature on trade agreements as to whether preferential liberalization leads to more or less multilateral liberalization. Research has focused mostly on tariff measures of import protection. We develop more comprehensive measures of trade policy that include the temporary trade barrier (TTB) policies of antidumping and safeguards. Studies in other contexts have similarly shown how these policies can erode some of the trade liberalization gains that appear based on an assessment of tariffs alone. We examine the experiences of Argentina and Brazil during the formation of the Mercosur customs union (1990–2001) and find that an exclusive focus on applied tariffs may lead to a mischaracterization of the relationship between preferential liberalization and liberalization toward nonmember countries. We find that any “building block” evidence associated with a focus on tariffs during the period in which Mercosur was a free trade area can disappear once we include changes in import protection from TTBs. Furthermore, there is evidence of a “stumbling block” effect of preferential tariff liberalization for the period in which Mercosur became a customs union, and this result tends to strengthen upon inclusion of TTBs. Finally, we provide a first empirical examination of whether market power motives can help explain the patterns of changes to import protection that are observed in these settings.

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Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP16-12.

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Date of creation: Oct 2016
Handle: RePEc:iie:wpaper:wp16-12
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  1. Bohara, Alok K. & Gawande, Kishore & Sanguinetti, Pablo, 2004. "Trade diversion and declining tariffs: evidence from Mercosur," Journal of International Economics, Elsevier, vol. 64(1), pages 65-88, October.
  2. Ketterer, Tobias D. & Bernhofen, Daniel & Milner, Chris, 2014. "Preferences, rent destruction and multilateral liberalization: The building block effect of CUSFTA," Journal of International Economics, Elsevier, vol. 92(1), pages 63-77.
  3. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
  4. Karacaovali, Baybars & Limão, Nuno, 2008. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," Journal of International Economics, Elsevier, vol. 74(2), pages 299-327, March.
  5. Joseph Mai & Andrey Stoyanov, 2015. "The effect of the Canada-US Free Trade Agreement on Canadian multilateral trade liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 1067-1098, August.
  6. Chad P. Bown & Baybars Karacaovali & Patricia Tovar, 2014. "What Do We Know About Preferential Trade Agreements and Temporary Trade Barriers?," Working Papers 201418, University of Hawaii at Manoa, Department of Economics.
  7. John Kennan & Raymond Riezman, 2013. "Optimal Tariff Equilibria with Customs Unions," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 5, pages 53-66 World Scientific Publishing Co. Pte. Ltd..
  8. Thomas J. Prusa & Robert Teh, 2010. "Protection Reduction and Diversion: PTAs and the Incidence of Antidumping Disputes," NBER Working Papers 16276, National Bureau of Economic Research, Inc.
  9. Chad P. Bown, 2011. "Taking Stock of Antidumping, Safeguards and Countervailing Duties, 1990–2009," The World Economy, Wiley Blackwell, vol. 34(12), pages 1955-1998, December.
  10. Pramila Crivelli, 2014. "Regionalism and Falling External Protection in High and Low Tariff Members," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 14082, Institut d'Economie et Econométrie, Université de Genève.
  11. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
  12. Syropoulos, Constantinos, 1999. "Customs Unions and Comparative Advantage," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 239-266, April.
  13. Ketterer, Tobias D. & Bernhofen, Daniel M. & Milner, Chris, 2015. "The impact of trade preferences on multilateral tariff cuts: Evidence for Japan," Journal of the Japanese and International Economies, Elsevier, vol. 38(C), pages 31-51.
  14. Limão, Nuno & Tovar, Patricia, 2011. "Policy choice: Theory and evidence from commitment via international trade agreements," Journal of International Economics, Elsevier, vol. 85(2), pages 186-205.
  15. Kyle Bagwell & Robert W. Staiger, 2011. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization," American Economic Review, American Economic Association, vol. 101(4), pages 1238-1273, June.
  16. Rodney D. Ludema & Anna Maria Mayda, 2013. "Do terms-of-trade effects matter for trade agreements? Theory and evidence from WTO Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 128(4), pages 1837-1893.
  17. Tovar, Patricia, 2012. "Preferential Trade Agreements and Unilateral Liberalization: Evidence from CAFTA," World Trade Review, Cambridge University Press, vol. 11(04), pages 591-619, October.
  18. Nuno Limao, 2006. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," American Economic Review, American Economic Association, vol. 96(3), pages 896-914, June.
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