The Clash of Liberalizations: Preferential vs. Multilateral Trade Liberalization in the European Union

Limão, Nuno and Baybars Karacaovali
Authors registered in the RePEc Author Service: Nuno M. Limão

No 4973, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: There has been an explosion in the number of preferential trade agreements (PTAs) in the last decade. PTAs are characterized by liberalization with respect to only a few partners and thus, they can potentially clash with and retard multilateral trade liberalization (MTL). Despite this important concern with PTAs, there is almost no systematic evidence on whether they actually affect MTL or not. We model the effect of PTAs on MTL and show that PTAs slow down MTL unless they have a common external tariff and allow for internal transfers. Next, we use detailed data on product-level tariffs negotiated by the European Union in the last two multilateral trade rounds to structurally estimate our model. We confirm the main prediction ? the European Union's PTAs have clashed with its MTL ? and find that the effect is quantitatively significant. Moreover, we also confirm several auxiliary predictions of the model and provide new evidence on the political economy determinants of MTL in the European Union.

Keywords: Preferential trade agreements; Multilateral trade negotiations; Mfn tariff concessions (search for similar items in EconPapers)
JEL-codes: D78 F13 F14 F15 (search for similar items in EconPapers)
Date: 2005-03
New Economics Papers: this item is included in nep-eec, nep-int and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union (2008)
Working Paper: THE CLASH OF LIBERALIZATIONS: PREFERENTIAL VS. MULTILATERAL TRADE LIBERALIZATION IN THE EUROPEAN UNION (2005)
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