Gabriel Felbermayr, Feodora Teti, Erdal Yalcin, 10 September 2019

Rules of origin exist to avoid trade deflection, but they distort global value chains and are costly to abide by. This column shows empirically that in preferential trade agreements, trade deflection is unlikely to be profitable because tariffs are generally low, that countries in a common free trade agreement tend to have similar external tariff levels, and that when tariff levels differ, deflection is profitable at most for one country in the pair. Moreover, transportation costs create a natural counterforce. It appears that rules of origin are primarily used to limit trade, and hence represent an instrument for trade protection. 

Filip Tarlea, 07 April 2018

Preferential trade agreements don’t happen overnight – they require lengthy negotiations. This column examines the effect the process of negotiating an agreement has on trade between the negotiating parties. The results suggest that during prolonged negotiations, the expectation of the agreement, or uncertainty before the signing of the agreement, undermine bilateral trade growth.

Leonardo Baccini, Johannes Urpelainen, 09 January 2015

From 1990 to 2009, more than 500 preferential trading agreements were formed by countries of all stripes. This column argues that the non-trade reform effects are central to understanding the causes and consequences of the recent trade agreement wave. Developing country leaders use deep, legally binding trade agreements with major economic powers, especially the US and the EU, to enact and implement politically controversial domestic reforms.

Bernard Hoekman, Petros Mavroidis, 16 July 2014

The proliferation of trade ‘clubs’ indicates that governments are keen on engaging in trade liberalisation. This column argues that the creation of new trade clubs under the umbrella of the WTO is inevitable. Such issue-specific (plurilateral) agreements keep the cord with the WTO tight, while allowing countries to cooperate on issues outside of WTO’s grounds.

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