IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/38565.html
   My bibliography  Save this paper

Measuring preferential market access

Author

Listed:
  • Fugazza, Marco
  • Nicita, Alessandro

Abstract

One consequence of the proliferation of preferential trade agreements is that an increasing share of international trade is not subject to most favored nation tariffs, but rather enters markets through preferential access. The objective of this paper is to better investigate to what extent preferential market access affects bilateral trade. In doing so, the paper first provides two indices of market access conditions that take into account the complex structure of tariff preferences. One index summarizes direct market access conditions (the overall tariff faced by exports), while the other measures relative market access conditions (the overall tariff faced by exports relative to that faced by foreign competitors). Then, the paper explores the effects of preferential access on international trade by estimating a gravity model augmented by the two indices. The results indicate that both direct and relative market access conditions affect bilateral trade. Although a large majority of countries benefits from the system of preference because of improved direct market access, some countries see part of their benefits eroded, sometimes substantially, by the deterioration in their relative market access conditions.

Suggested Citation

  • Fugazza, Marco & Nicita, Alessandro, 2011. "Measuring preferential market access," MPRA Paper 38565, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38565
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/38565/1/MPRA_paper_38565.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    2. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    3. Caroline Freund & Emanuel Ornelas, 2010. "Regional Trade Agreements," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 139-166, September.
    4. Feenstra, Robert C., 1995. "Estimating the effects of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 30, pages 1553-1595, Elsevier.
    5. Pravin Krishna, 1998. "Regionalism and Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 227-251.
    6. Kimberly A. Clausing, 2001. "Trade creation and trade diversion in the Canada - United States Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 677-696, August.
    7. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
    8. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    9. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    10. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The magazine for economic performance 313, Centre for Economic Performance, LSE.
    11. Baldwin, Richard & Jaimovich, Dany, 2012. "Are Free Trade Agreements contagious?," Journal of International Economics, Elsevier, vol. 88(1), pages 1-16.
    12. Hiau Looi Kee & Cristina Neagu & Alessandro Nicita, 2013. "Is Protectionism on the Rise? Assessing National Trade Policies during the Crisis of 2008," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 342-346, March.
    13. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    14. Magee, Christopher S.P., 2008. "New measures of trade creation and trade diversion," Journal of International Economics, Elsevier, vol. 75(2), pages 349-362, July.
    15. Calvo-Pardo, Hector & Freund, Caroline & Ornelas, Emanuel, 2009. "The ASEAN free trade agreement : impact on trade flows and external trade barriers," Policy Research Working Paper Series 4960, The World Bank.
    16. Baldwin, Richard & Seghezza, Elena, 2007. "Are Trade Blocs Building or Stumbling Blocks? New Evidence," CEPR Discussion Papers 6599, C.E.P.R. Discussion Papers.
    17. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    18. Hoekman, Bernard & Nicita, Alessandro, 2011. "Trade Policy, Trade Costs, and Developing Country Trade," World Development, Elsevier, vol. 39(12), pages 2069-2079.
    19. Cadot, Olivier & Estevadeordal, Antoni & Suwa-Eisenmann, Akiko & Verdier, Thierry (ed.), 2006. "The Origin of Goods: Rules of Origin in Regional Trade Agreements," OUP Catalogue, Oxford University Press, number 9780199290482.
    20. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 441-487.
    21. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Toward Nonmembers?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1531-1575.
    22. 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.
    23. 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.
    24. Carrere, Celine, 2006. "Revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model," European Economic Review, Elsevier, vol. 50(2), pages 223-247, February.
    25. Lee, Jong-Wha & Shin, Kwanho, 2006. "Does regionalism lead to more global trade integration in East Asia?," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 283-301, December.
    26. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
    27. Martijn Burger & Frank van Oort & Gert-Jan Linders, 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-inflated Estimation," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(2), pages 167-190.
    28. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
    29. Olivier Cadot & Antoni Estevadeordal & Akiko Suwa-Eisenmann & Thierry Verdier, 2006. "The Origin of Goods: Rules of Origin in Regional Trade Agreements," Post-Print halshs-00754856, HAL.
    30. Bhagwati, Jagdish, 2008. "Termites in the Trading System: How Preferential Agreements Undermine Free Trade," OUP Catalogue, Oxford University Press, number 9780195331653.
    31. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Estimating the effects of free trade agreements on international trade flows using matching econometrics," Journal of International Economics, Elsevier, vol. 77(1), pages 63-76, February.
    32. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    33. Emanuel Ornelas, 2005. "Rent Destruction and the Political Viability of Free Trade Agreements," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(4), pages 1475-1506.
    34. John Romalis, 2007. "Market Access, Openness and Growth," NBER Working Papers 13048, National Bureau of Economic Research, Inc.
    35. Ghosh, Sucharita & Yamarik, Steven, 2004. "Are regional trading arrangements trade creating?: An application of extreme bounds analysis," Journal of International Economics, Elsevier, vol. 63(2), pages 369-395, July.
    36. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
    37. Bernard Hoekman & Will Martin & Carlos A. Primo Braga, 2009. "Trade Preference Erosion : Measurement and Policy Response," World Bank Publications - Books, The World Bank Group, number 9437, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Valeria Groppo & Roberta Piermartini, 2014. "Trade Policy Uncertainty and the WTO," Discussion Papers of DIW Berlin 1437, DIW Berlin, German Institute for Economic Research.
    2. Соколовская Е.В., 2016. "Unilateral tariff cuts: a theory," Экономический вестник университета. Сборник научных трудов ученых и аспирантов, CyberLeninka;Государственное высшее учебное заведение «Переяслав-Хмельницкий государственный педагогический университет имени Григория Сковороды», issue 29-1, pages 268-274.
    3. Emiliano Magrini & Pierluigi Montalbano & Silvia Nenci, 2013. "Are the EU trade preferences really effective? A Generalized Propensity Score evaluation of the Southern Mediterranean Countries' case in agriculture and fishery," Working Papers 2/13, Sapienza University of Rome, DISS.
    4. Cipollina, Maria & Laborde, David & Salvatici, Luca, 2013. "Do Preferential Trade Policies (Actually) Increase Exports? An analysis of EU trade policies," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150177, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Marco Fugazza & Alessandro Nicita, 2011. "On The Importance Of Market Access For Trade," UNCTAD Blue Series Papers 50, United Nations Conference on Trade and Development.
    3. 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.
    4. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    5. Alberto Behar & Laia Cirera-i-Crivillé, 2013. "Does it Matter Who You Sign With? Comparing the Impacts of North–South and South–South Trade Agreements on Bilateral Trade," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 765-782, September.
    6. 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.
    7. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    8. Sharma, Anupa & Grant, Jason & Boys, Kathryn, 2015. "Truly Preferential Treatment? Reconsidering the Generalized System of (Trade) Preferences," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205890, Agricultural and Applied Economics Association.
    9. 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.
    10. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    11. Jin, Seung Ha, 2013. "The Effect of South Korean FTAs on Trade: Country-level and Industry-level Analyses," Master's Theses and Plan B Papers 149430, University of Minnesota, Department of Applied Economics.
    12. Sorgho, Zakaria, 2014. "RTAs’ Proliferation and Trade-diversion effects: Evidence of the “Spaghetti Bowl” Phenomenon," MPRA Paper 60503, University Library of Munich, Germany.
    13. Emiliano Magrini & Pierluigi Montalbano & Silvia Nenci, 2013. "Are the EU trade preferences really effective? A Generalized Propensity Score evaluation of the Southern Mediterranean Countries' case in agriculture and fishery," Working Papers 2/13, Sapienza University of Rome, DISS.
    14. Jayjit Roy, 2014. "On the robustness of the trade-inducing effects of trade agreements and currency unions," Empirical Economics, Springer, vol. 47(1), pages 253-304, August.
    15. Moser, Christoph & Rose, Andrew K., 2014. "Who benefits from regional trade agreements? The view from the stock market," European Economic Review, Elsevier, vol. 68(C), pages 31-47.
    16. Crivelli, Pramila, 2016. "Regionalism and falling external protection in high and low tariff members," Journal of International Economics, Elsevier, vol. 102(C), pages 70-84.
    17. Cheong, Juyoung & Kwak, Do Won & Tang, Kam Ki, 2015. "Heterogeneous Effects of Preferential Trade Agreements: How does Partner Similarity Matter?," World Development, Elsevier, vol. 66(C), pages 222-236.
    18. Zakaria Sorgho, 2016. "RTAs' Proliferation and Trade-diversion Effects: Evidence of the ‘Spaghetti Bowl’ Phenomenon," The World Economy, Wiley Blackwell, vol. 39(2), pages 285-300, February.
    19. Gnutzmann-Mkrtchyan, Arevik & Henn, Christian, 2018. "Peeling away the layers: Impacts of durable tariff elimination," Journal of International Economics, Elsevier, vol. 115(C), pages 259-276.
    20. Ornelas, Emanuel, 2012. "Preferential trade agreements and the labor market," LSE Research Online Documents on Economics 121752, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    Gravity Model; Trade policy; International Trade Flows; Tariffs;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F10 - International Economics - - Trade - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38565. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.