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

Kamal Saggi (), Andrey Stoyanov and Halis Yildiz

Chapter 11 in Economic Analysis of the Rules and Regulations of the World Trade Organization, 2018, pp 238-280 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We investigate the effects of free trade agreements (FTAs) on tariffs of nonmember 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 nonmembers to manipulate their terms of trade vis-à-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.

Keywords: Multilateral Trading System; Trade Agreements; Trade Liberalization; International Tariff Cooperation; WTO Disputes; Case Studies (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: 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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