Preferential Trade Agreements

Nuno Limão, Handbook of Commercial Policy 1, 279-367, .


A large and growing number of countries participate in multiple preferential trade agreements (PTAs), which increasingly entail broad cooperation over policies extending far beyond trade barriers. I review the traditional and nontraditional motives for PTAs and their empirical determinants as well as their impacts on trade and on multilateral liberalization. I argue that the broad nature of modern PTAs, their substantial creation of bilateral trade, and their modest effects on members ’ tariffs, require us to augment the economic and policy structure of traditional models of PTAs as a static preferential tariff reduction. Throughout I draw lessons from the existing literature and point toward many interesting paths for future research, to advance our understanding of the causes of modern PTAs and their impacts on trade-related outcomes and beyond.

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