Third-Country Effects on the Formation of Free Trade Agreements

Maggie Chen and Sumit Joshi

MPRA Paper from University Library of Munich, Germany

Abstract: The recent proliferation of free trade agreements (FTAs) has resulted in an increasingly complex network of preferential trading relationships. The economics literature has generally examined the formation of FTAs as a function of the participating countries' economic characteristics alone. In this paper, we show both theoretically and empirically that the decision to enter into an FTA is also crucially dependent on the participating countries' existing FTA relationships with third countries. Accounting for the interdependence of FTAs helps to explain a significant fraction of FTA formations that would not otherwise be predicted by countries' economic characteristics.

Keywords: free trade agreements; third-country effect; loss sharing; concession erosion (search for similar items in EconPapers)
JEL-codes: F11 F15 (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-int and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Related works:
Journal Article: Third-country effects on the formation of free trade agreements (2010)
Working Paper: Third-Country Effects on the Formation of Free Trade Agreements (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:23507

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