Working Paper: NBER ID: w17840
Authors: Pravin Krishna
Abstract: This paper reviews recent developments in international trade to evaluate several arguments concerning the merits of preferential trade agreements (PTAs) and their place in the world trade system. Taking a multilateralist perspective, it makes several points: First, despite the proliferation of PTAs in recent years, the actual amount of liberalization that has been achieved through PTAs is actually quite limited. Second, at least a few studies point to significant trade diversion in the context of particular PTAs and thus serve as a cautionary note against casual dismissals of trade diversion as a merely theoretical concern. Equally, adverse effects on the terms-of-trade of non-member countries have also been found in the literature. Third, while the literature has found mixed results on the question of whether tariff preferences help or hurt multilateral liberalization, the picture is different with the more elastic tools of trade policy, such as antidumping duties (ADs); the use of ADs against non-members appears to have dramatically increased while the use of ADs against partner countries within PTAs has fallen. Fourth, despite the rapid expansion of preferences in trade, intra-PTA trade shares are relatively small for most PTAs; multilateral remain relevant to most member countries of the WTO.
Keywords: Preferential Trade Agreements; World Trade; Trade Liberalization; Multilateralism
JEL Codes: F1; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| PTAs (J44) | trade liberalization (F13) |
| PTAs (Z22) | trade diversion (F14) |
| trade diversion (F14) | welfare losses (D69) |
| antidumping duties (F18) | trade patterns (F10) |
| PTAs (Z22) | intra-PTA trade shares (F16) |
| intra-PTA trade shares (F16) | multilateral initiatives (F53) |