Free Trade Agreements and Globalisation: In the Shadow of Brexit and Trump (original) (raw)
Related papers
Non-tariff barriers, integration and the transatlantic economy
Economic Policy, 2015
We examine the potential impact of TTIP through trade-cost reductions, applying a mix of econometric and computational methods to develop estimates of the benefits (and costs) for the EU, United States, and third countries. Econometric results point to an approximate 80% growth in bilateral trade with an ambitious trade agreement. However, at the same time, computable general equilibrium (CGE) estimates highlight distributional impacts across countries and factors not evident from econometrics alone. Translated through our CGE framework, while bilateral trade increases roughly 80%, there is a fall of about 2.5% in trade with the rest of the world in our central case. The estimated gains in annual consumption range between 1% and 2.25% for the United States and EU, respectively. A purely discriminatory agreement would harm most countries outside the agreement, while the direction of third-country effects hinges critically on whether NTB reductions end up being discriminatory or not. Within the United States and EU, while labour gains across skill categories, the impact on farmers is mixed.
Journal of International Economics
We develop a novel two-stage methodology that allows us to study the empirical determinants of the ex post effects of past free trade agreements (FTAs) as well as obtain ex ante predictions for the effects of future FTAs. We first identify 908 unique estimates of the effects of FTAs on different trading pairs for the years 1986-2006. We then employ these estimates as our dependent variable in a "second stage" characterizing the heterogeneity in these effects. Interestingly, most of this heterogeneity (~ 2/3) occurs within FTAs (rather than across different FTAs), with asymmetric effects within pairs (on exports vs. imports) also playing a important role. We offer several intuitive explanations for these variations. Even with the same agreement, FTA effects are weaker for more distant pairs and for pairs with otherwise high levels of ex ante trade frictions. The effects of new FTAs are similarly weaker for pairs with existing agreements already in place. In addition, we are able to relate asymmetries in FTA effects to each country's ability to influence the other's terms of trade. Out-of-sample predictions incorporating these insights enable us to predict direction-specific effects of future FTAs between any pair of countries. A simulation of the general equilibrium effects of TTIP demonstrates the importance of our methods.
Free Trade Agreements versus Customs Unions : Implications for Global Free Trade
2013
We examine whether the pursuit of free trade agreements (FTAs) affects the prospects of global free trade differently than the pursuit of Customs Unions (CUs). Our analysis is driven by a fundamental difference between these two types of preferential trade agreements (PTAs): while CU members impose jointly optimal common tariffs on non-members, members of an FTA adopt individually optimal external tariffs. This difference in tariff setting behavior between FTAs and CUs has two important implications. First, FTAs are relatively more flexible than CUs since an FTA member is free to undertake further trade liberalization with respect to non-members whereas a CU member can do so only if all CU members wish to do the same. Second, the coordination of tariffs allows members of a CU to pool their market power. In our comparative advantage based three country framework, the formation of either type of PTA induces the non-member to lower its tariffs due to the reduction in the volume of expo...
We utilize a three-country trade model to determine the effect of the formation of an FTA on equilibrium tariffs and welfare levels under the assumption that countries choose external tariffs independently to maximize national welfare. We show that the liberalization of internal trade by symmetric member countries causes their optimal external tariff (at constant nonmember tariffs) to fall below its Kemp-Wan (1976) level thereby raising the nonmember country's welfare. If the nonmember country also behaves strategically then, in the Nash equilibrium, this country adopts a more aggressive stance in its policy and induces FTA members to reduce their external tariff even more. For these reasons, the nonmember country benefits from integration; in contrast, member countries benefit only if the combined size of the FTA is sufficiently large. Keywords: Free trade areas, Kemp-Wan tariff adjustments, strategic interactions, welfare JEL Classification: F11, F13, F15, F42 Address for Corr...
A political economy analysis of free trade areas and customs unions
1994
Following lead, trade theorists have generally treated trade policy as exogenous in evaluating the welfare effects of preferential trading arrangements. The general approach has been to start with a tariff distorted equilibrium and ask whether a particular set of preferential tariff reductions between union partners is welfare-improving for each participating country, the union and the world as a whole.'
Regional Integration and Lobbying for Tariffs Against Nonmembers
International Economic Review, 1999
We study the impact of regional trading arrangements (rias) on tariff policy towards non-members in a three-good, three-country political-economy model. Comparing free-trade areas (ftas) with and without rules of origin and customs unions (cus) with varying degrees of economic and political integration, we show how increasingly deep integration can lead to rising protection against non-member imports. Other differences between ftas and cus, like the extent of free-riding in a cu and any component of a cu's tariff designed to improve the members' terms of trade, are not explicitly accounted for. Nevertheless, the results suggest that ftas are likely to welfare-dominate cus.
Free Trade Agreements in the World Trade System: Benefits and Models
Financial and credit activity problems of theory and practice
It is indicated that one of the characteristic features of the modern trade system is the rapid growth of the number of regional trade agreements, which, in turn, causes asymmetry in the dominance of regional cross-border trade rules over multilateral ones. The main advantages for countries from participating in regional trade agreements have been identified: the possibility of excluding "vulnerable sectors" from the agreement; the ability to independently choose partners in negotiations; the use of the principle of "reciprocity" is more effective compared to the World Trade Organization, the possibility of forming the image of a regional leader; within the framework of such agreements, it is possible to carry out "experimental application" of certain new measures in the field of trade, which, if successfully tested, can be tried to be applied in general mode; the possibility of attracting more foreign investments by developing countries that are not re...