In many preferential trade agreements (PTAs) countries exchange not only reductions in trade barriers but also cooperation in non-trade issues such as labor and environmental standards, intellectual property, etc. We provide a model of PTAs motivated by cooperation in non-trade issues and analyze its implications for global free trade and welfare. We find that such PTAs increase the cost of multilateral tariff reductions and thus cause a stumbling block to global free trade.
Are Preferential Trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?Nuno Limão ,
3( 74 )
Review of Economic Studies
Are Preferential Trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?