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Competitive Liberalization or Competitive Diversion? The Relationship between Preferential Trade Agreements and the Multilateral Trading System


  • Soamiely Andriamananjara



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.

Suggested Citation

  • Soamiely Andriamananjara, 2003. "Competitive Liberalization or Competitive Diversion? The Relationship between Preferential Trade Agreements and the Multilateral Trading System," International Trade 0305002, EconWPA.
  • Handle: RePEc:wpa:wuwpit:0305002
    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

    1. Pravin Krishna, 1998. "Regionalism and Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 227-251.
    2. 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.
    3. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    4. 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.
    5. 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.
    6. 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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    More about this item


    competitive liberalization Regionalism Multilateralism;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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