Does Regionalism Affect Trade Liberalization Toward Nonmembers?

We examine the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation (MFN) tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. We find that preferential tariff reduction in a given sector leads to a reducti...

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Bibliographic Details
Published in:The Quarterly journal of economics 2008-11, Vol.123 (4), p.1531-1575
Main Authors: Estevadeordal, Antoni, Freund, Caroline, Ornelas, Emanuel
Format: Article
Language:English
Subjects:
Customs unions
Development Planning and Policy: Trade Policy
Economic impact
Economic Integration F150
Factor Movement
Foreign Exchange Policy O240
Free trade
Free trade zones
Imports
International Linkages to Development
International Trade Organizations F130
Liberalization
Most favored nation
Multilateralism
Regionalism
Role of International Organizations O190
Studies
Tariffs
Trade liberalization
Trade Policy
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Summary:We examine the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation (MFN) tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. We find that preferential tariff reduction in a given sector leads to a reduction in the external (MFN) tariff in that sector. External liberalization is greater if preferences are granted to important suppliers. However, these "complementarity effects" of preferential liberalization on external liberalization do not arise in customs unions. Overall, our results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded.
ISSN:0033-5533
1531-4650
DOI:10.1162/qjec.2008.123.4.1531