Preferential Trade Agreements and Their Role in World Trade

90 Pages Posted: 20 Apr 2016

See all articles by Denis Medvedev

Denis Medvedev

World Bank; American University

Date Written: October 1, 2006

Abstract

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.

Keywords: Free Trade, Trade Law, Trade Policy, Economic Theory & Research, Trade and Services

Suggested Citation

Medvedev, Denis, Preferential Trade Agreements and Their Role in World Trade (October 1, 2006). World Bank Policy Research Working Paper No. 4038. Available at SSRN: https://ssrn.com/abstract=938031

Denis Medvedev (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

American University

4400 Massachusetts Avenue N.W.
Washington, DC 20016-8029
United States

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