On the different geographic characteristics of Free Trade Agreements and Customs Unions

Halis Yildiz and James Lake

No 53, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: A striking phenomenon emerges from casual observation of the geographical characteristics of Preferential Trade Agreements (PTAs): while Customs Unions (CUs) are only intra-regional, Free Trade Agreements (FTAs) are both inter and intra?regional. A second striking phenomenon is that FTAs dramatically outnumber CUs. We present a farsighted dynamic model that endogenizes the choice of PTA type and rationalizes the first phenomenon via an FTA flexibility benefit: FTAs are more flexible than CUs because an FTA member is free to form further PTAs with non-members whereas a CU member must engage in further PTAs jointly with all existing members. Our model also suggests that greater distance between countries increases the prevalence of FTAs relative to CUs. Finally, the model relates geography and market size to the order of PTA formation

Keywords: Free Trade Agreement; Customs Union; flexibility; coordination; geography; networks; farsighted (search for similar items in EconPapers)
JEL-codes: C71 F12 F13 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015-09
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.arts.ryerson.ca/economics/repec/pdfs/wp053.pdf (application/pdf)

Related works:
Journal Article: On the different geographic characteristics of Free Trade Agreements and Customs Unions (2016)
Working Paper: On the different geographic characteristics of Free Trade Agreements and Customs Unions (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rye:wpaper:wp053

Access Statistics for this paper

More papers in Working Papers from Toronto Metropolitan University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Doosoo Kim ().