Preferential trade agreements and their role in world trade

No 4038, Policy Research Working Paper Series from The World Bank

Abstract: The author investigates the effects of preferential trade agreements (PTAs) on bilateral trade flows using a comprehensive database of PTAs in force and a detailed matrix of world trade. He shows that total trade between PTA partners is a poor proxy for preferential trade (trade in tariff lines where preferences are likely to matter): while the former amounted to one-third of global trade in 2000-02, the latter was between one-sixth and one-tenth of world trade. His gravity model estimates indicate that using total rather than preferential trade to assess the impact of PTAs leads to a significant downward bias in the PTA coefficient. The author finds that product exclusions and long phase-in periods significantly limit preferential trade, and their removal could more than double trade in tariff lines above 3 percent of most-favored-nation (MFN) duties. He also shows that the effects of PTAs on trade vary by type of agreement and are increasing in the incomes of PTA partners.

Keywords: Free Trade; Trade Law; Trade Policy; Economic Theory&Research; Trade and Services (search for similar items in EconPapers)
Date: 2006-10-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (16)

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Journal Article: Preferential trade agreements and their role in world trade (2010)
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