Preferential trade agreements and the multilateral trade system

On the Relationship between Preferential and Multilateral Trade Agreements

In this paper we study the consequences of regional free trade agreements (FTAs) for global free trade. In the context of a three-country, two-good general equilibrium trade model, we derive stable Nash equilibria of two coalition formation games of trade liberalization: One in which FTAs are ruled out, and another in which countries have the option to form FTAs. Our analysis reveals that there...

Preferential Trade Agreements

Endogenous Free Trade Agreements and the Multilateral Trading System

I evaluate in this paper the impact of free trade areas (FTAs) on the world trading system. I use an oligopolistic-political-economy model where the external tariffs of FTA members, as well as the decision to form FTAs, are endogenously determined. In this context, I show that FTAs are primarily beneficial to the multilateral trading system. This conclusion is based, first, upon the finding tha...

Regional Trade Agreements in a Multilateral Trade Regime: An Overview

One of the most striking development in the world trading system since the mid 1990s is a surge in Regional Trade Agreements (RTAs). From about 50 till 1990, the number of RTAs notified to the World Trade Organization (WTO) has crossed 250 in 2003 and estimates indicate that over 300 RTAs will be in effect by 2007. Initially WTO encouraged the growth of RTAs because it believed that regional in...

Forbearance in optimal multilateral trade agreements∗

I present a theory of optimal multilateral trade agreements with public political shocks. I show that “forbearance” where one country withholds retaliation when its trading partner receives a shock is a feature of an optimal agreement. This provides a rationale for countries not acting on retaliatory rights granted under GATT. I show that there is a limit to forbearance allowable in a self-enfo...