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Do South-South Preferential Trade Agreements Undermine the Prospects for Multilateral Free Trade?

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Listed:
  • Paul Missios

    () (Department of Economics, Ryerson University, Toronto, Canada)

  • Halis Murat Yildiz

    () (Department of Economics, Ryerson University, Toronto, Canada)

Abstract

Due to trade diversion, there has been concerns expressed over the proliferation of preferential trade agreements (PTAs) between South countries. In this paper, we compare welfare across the various forms of bilateral free trade agreements (FTAs) and customs unions (CUs) and examine their implications for the stability of multilateral free trade. While North-North PTAs tend to yield higher welfare, we fi?nd certain cases where South-South agreements are more likely to lead to global free trade than North-North or North-South agreements, but other cases where multilateral cooperation over free trade is the least likely under South-South agreements. We also examine how the expansion of existing agreements, or the combination of separate agreements, affects the potential for free trade.

Suggested Citation

  • Paul Missios & Halis Murat Yildiz, 2013. "Do South-South Preferential Trade Agreements Undermine the Prospects for Multilateral Free Trade?," Working Papers 045, Ryerson University, Department of Economics, revised Feb 2015.
  • Handle: RePEc:rye:wpaper:wp045
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    References listed on IDEAS

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    1. Bagwell, Kyle & Staiger, Robert W., 1997. "Multilateral tariff cooperation during the formation of customs unions," Journal of International Economics, Elsevier, vol. 42(1-2), pages 91-123, February.
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    3. Bond, Eric W. & Syropoulos, Constantinos & Winters, L. Alan, 2001. "Deepening of regional integration and multilateral trade agreements," Journal of International Economics, Elsevier, vol. 53(2), pages 335-361, April.
    4. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July.
    5. Kamal Saggi & Alan Woodland & Halis Murat Yildiz, 2013. "On the Relationship between Preferential and Multilateral Trade Liberalization: The Case of Customs Unions," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 63-99, February.
    6. 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.
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    10. P. Magee, Stephen & Lee, Hak-Loh, 2001. "Endogenous tariff creation and tariff diversion in a customs union," European Economic Review, Elsevier, vol. 45(3), pages 495-518, March.
    11. Karacaovali, Baybars & Limao, Nuno, 2005. "The clash of liberalizations : preferential versus multilateral trade liberalization in the European Union," Policy Research Working Paper Series 3493, The World Bank.
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    Cited by:

    1. Helble, Matthias & Ali, Zulfiqar & Lego, Jera, 2018. "A Comparison of Global Governance Across Sectors: Global Health, Trade, and Multilateral Development Finance," ADBI Working Papers 806, Asian Development Bank Institute.

    More about this item

    Keywords

    trade agreements; free trade; development; tariffs;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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