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GVCs and the Endogenous Geography of RTAs

Lionel Fontagné () and Gianluca Santoni ()

Working Papers from CEPII research center

Abstract: There has been considerable attention paid to the endogenous nature of regional trade agreements Geography, economic size, or common history help predicting signed agreements. However, not all signed RTAs are “natural" according to economic determinants, as trade negotiations can be used as a tool of external policy. Recent developments in terms of structural gravity help clarifying this debate by taking account of all theoretically relevant determinants of bilateral trade, as well as general equilibrium effects of signing an agreement. Indeed, the endogeneity of trade arrangements has a time dimension and is related to firm strategies. These are the two mechanisms addressed in this paper. We estimate the time-varying probability for a country pair to sign a trade agreement and build upon structural gravity in general equilibrium to determine how the patterns of Global Value Chains shape the evolving geography of optimal trade agreements. Our results confirm that the endogenous geography of RTAs is shaped by the development of GVCs.

Keywords: Preferential Trade Agreements; Global Value Chains; Structural Gravity (search for similar items in EconPapers)
JEL-codes: F13 F14 F16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2018-04
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Working Paper: GVCs and the Endogenous Geography of RTAs (2018) Downloads
Working Paper: GVCs and the Endogenous Geography of RTAs (2018) Downloads
Working Paper: GVCs and the Endogenous Geography of RTAs (2018) Downloads
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