Competitive Liberalization or Competitive Diversion? The Relationship between Preferential Trade Agreements and the Multilateral Trading System
This article discusses whether the current proliferation of preferential trade agreements-the so-called "competitive liberalization"-encourages evolution toward multilateral free trade. It argues that countries pursuing preferential trade initiatives are in pursuit of the economic rents resulting from the trade diversion associated with trade preference (or discrimination). By lowering the margin of preference, multilateral trade liberalization reduces those rents and is likely to be resisted by members of trade-diverting preferential blocs. Future preferential agreements should be designed to be less trade diverting in order to be more compatible with the objective of global free trade.
|Date of creation:||09 May 2003|
|Note:||Type of Document - Word - PDF; prepared on IBM PC ; to print on HP/PostScript/Franciscan monk; pages: 14 ; figures: included|
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References listed on IDEAS
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- C. Fred Bergsten, 1996. "Competitive Liberalization and Global Free Trade: A Vision for the Early 21st Century," Working Paper Series WP96-15, Peterson Institute for International Economics.
- Andriamananjara, Soamiely, 2000. "Regionalism and Incentives for Multilateralism," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 1-18.
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- Andriamananjara, Soamiely, 1999. "On the size and number of regional integration arrangements - a political economy model," Policy Research Working Paper Series 2117, The World Bank.
- Anne O. Krueger, 1999. "Are Preferential Trading Arrangements Trade-Liberalizing or Protectionist?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 105-124, Fall.
- Pravin Krishna, 1998. "Regionalism and Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 227-251.
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