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Does regionalism affect trade liberalization toward non-members ?

  • Estevadeordal, Antoni
  • Freund, Caroline
  • Ornelas, Emanuel

This paper examines the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. The findings show that preferential tariff reduction in a given sector leads to a reduction in the external (most-favored nation) tariff in that sector. External liberalization is greater if preferences are granted to important suppliers. However, these"complementarity effects"of preferential liberalization on external liberalization do not arise in customs unions. Overall, the results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4751.

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Date of creation: 01 Oct 2008
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Handle: RePEc:wbk:wbrwps:4751
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  7. Caroline L. Freund, 1998. "Multilateralism and the endogenous formation of PTAs," International Finance Discussion Papers 614, Board of Governors of the Federal Reserve System (U.S.).
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  18. Syropoulos, Constantinos, 1999. "Customs Unions and Comparative Advantage," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 239-66, April.
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  26. Maurice Schiff & L. Alan Winters, 2003. "Regional Integration and Development," World Bank Publications, The World Bank, number 15172, December.
  27. Panagariya, Arvind & Findlay, Ronald & DEC, 1994. "A political - economy analysis of free trade areas and customs unions," Policy Research Working Paper Series 1261, The World Bank.
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