The Uneven Roles of FTAs: Selection Effect or 'Learning' Effect?

17 Pages Posted: 26 Feb 2010

See all articles by Lin Faqin

Lin Faqin

School of Economics; School of International Trade and Economics

Date Written: February 24, 2010

Abstract

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

Faqin, Lin, The Uneven Roles of FTAs: Selection Effect or 'Learning' Effect? (February 24, 2010). Available at SSRN: https://ssrn.com/abstract=1558089 or http://dx.doi.org/10.2139/ssrn.1558089

Lin Faqin (Contact Author)

School of Economics ( email )

No 233 North Terrace, School of Economics
Adelaide, SA 5005, SA 5005
Australia

School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

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