Preferential Trade Agreements and MFN Tariffs: Global Evidence

David Kuenzel and Rishi Sharma

No 2019-004, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: We study the effects of preferential trade agreements (PTAs) on multilateral liberalization using a new global tariff database that covers the 2001-2010 period. Employing a theoretically motivated empirical approach and instrumental variable strategy, we provide evidence that PTAs induce tariff cuts on non-member countries. Our baseline estimates imply that each 1% point PTA-induced decline in applied tariffs lowers most-favored nation (MFN) tariff rates by 0.42% points. This effect is driven by countries that negotiate deeper preferential trade deals. PTAs that span more policy fields are prone to lead to more inefficient trade diversion, which creates a stronger incentive to subsequently cut MFN tariffs. At the same time, our results are remarkably consistent across other subsamples emphasized in the literature, including high- and low-tariff importers, poorer and richer economies as well as large and small countries.

Keywords: Trade Agreements; GATT/WTO; Tariffs (search for similar items in EconPapers)
JEL-codes: F13 F14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-11
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 (1)

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Related works:
Journal Article: Preferential trade agreements and MFN tariffs: Global evidence (2021)
Working Paper: Preferential Trade Agreements and MFN Tariffs: Global Evidence (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2019-004

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