Preferential Trade Agreements and Their Role in World Trade

Download or read book Preferential Trade Agreements and Their Role in World Trade written by Denis Medvedev and published by World Bank Publications. This book was released on with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.