Do Free Trade Agreements Affect Tariffs of Nonmember Countries? A Theoretical and Empirical Investigation

Kamal Saggi (), Andrey Stoyanov and Halis Yildiz

American Economic Journal: Applied Economics, 2018, vol. 10, issue 3, 128-70

Abstract: We investigate the effects of free trade agreements (FTAs) on tariffs of non-member countries. In our multi-country model, the formation of an FTA leads members to reduce their exports to the rest of the world. Such external trade diversion weakens the ability of non-members to manipulate their terms of trade vis-a-vis FTA members, a mechanism that induces them to lower their tariffs on FTA members. We empirically confirm this insight using industry-level trade data for 192 importing and 253 exporting countries, along with information on all FTAs formed in the world during 1989-2011.

JEL-codes: F13 F14 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/app.20150360
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Citations: View citations in EconPapers (15)

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Chapter: Do Free Trade Agreements Affect Tariffs of Nonmember Countries? A Theoretical and Empirical Investigation (2018)
Working Paper: Do free trade agreements affect tariffs of non-member countries? A theoretical and empirical investigation (2015)
Working Paper: Do free trade agreements affect tariffs of non-member countries? A theoretical and empirical investigation (2015)
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