Reciprocity in Free Trade Agreements

We use detailed trade, tariff, and income data for countries involved in 91 trade agreements negotiated since 1980 to test for reciprocity in free trade agreements. The results offer strong evidence of reciprocity in North-North and South-South free trade agreements, but there is little empirical support for reciprocity in North-South trade agreements. In particular, after controlling for other determinants of trade preferences, the results suggest that a one percent increase in preferences offered leads to about a onehalf of a percent increase in preferences received in North-North and South-South trade agreements. We also find evidence that large countries extract greater trade concessions from small countries. This leads to a modified form of reciprocity in North-South agreements; a large increase in access to a developing-country market leads to only a small increase in access to a rich-country market.