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On The Importance Of Market Access For Trade

  • Marco Fugazza
  • Alessandro Nicita

One of the consequences of the proliferation of preferential trade agreements is that an increasing share of international trade is not subject to the most favoured nation (MFN) tariff, but enters markets through preferential access. Preferential access affects trade because, by providing some countries with a relative advantage, it is essentially a discriminatory practice. This paper examines the extent to which preferential access affects bilateral trade flows. The empirical approach consists first in providing two indices: one summarizing direct market access conditions (the overall tariff faced by exports) and one measuring relative market access conditions (the overall tariff faced by exports relative to that faced by competitors). Then, the indices are used in a gravity model in order to estimate how changes in market access conditions affect international trade. Although those conditions are generally more important, the results indicate that the relative advantage provided by the structure of preferences also affects the magnitude of bilateral trade flows. That is, bilateral trade flows depend on the advantage provided by the system of preferences over other competitors.

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Paper provided by United Nations Conference on Trade and Development in its series UNCTAD Blue Series Papers with number 50.

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Date of creation: 2011
Date of revision:
Handle: RePEc:unc:blupap:50
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  1. Hector Calvo-Pardo & Caroline Freund & Emanuel Ornelas, 2009. "The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers," CEP Discussion Papers dp0930, Centre for Economic Performance, LSE.
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  8. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  9. 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.
  10. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  11. 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.
  12. 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.
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