The Uneven Roles of FTAs: Selection Effect or 'Learning' Effect?
17 Pages Posted: 26 Feb 2010
Date Written: February 24, 2010
Previous studies about FTA’s roles on promoting members’ international trade usually neglect three unevennesses: first, neglecting the roles of WTO membership on FTAs, second, neglecting the uneven roles of North-North, North-South and South-South FTAs, third and the most important, ignoring the difference between selection effects and "learning" effect - trade growth after the formation of FTAs, but just focus on FTAs premium. This paper considers the three unevennesses and uses a large panel data over 50 years and more than 175 countries bilateral trade to restudy FTAs’ roles. An extensive search finds that: first, it is WTO membership that actually helps North-South FTAs to improve bilateral trade; second, the premium of South-South FTAs are much higher than North-North FTAs; third, the premium of North-South and South-South FTAs are caused by selection effect while North-North FTAs are caused by "learning" effect.
Keywords: WTO membership, unevenness, FTA premium, selection effect, "learning" effect
JEL Classification: F10, F13, F15
Suggested Citation: Suggested Citation