DP4884 Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the US

Author(s): Nuno Limão

Publication Date: January 2005

Keyword(s): preferential trade agreements , multilateral trade negotiations , MFN tariff concessions , reciprocity

JEL(s): D78 , F13 , F14 , F15

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP4884.asp

Most countries are members of preferential trade agreements (PTAs). The effect of these agreements has attracted much interest and raised the question of whether PTAs promote or slow down multilateral trade liberalization, i.e. whether they are a ‘building block’ or a ‘stumbling block’ to multilateral liberalization. Despite this long-standing concern with PTAs and the lack of theoretical consensus there is no systematic evidence on whether they are actually a stumbling block to multilateral liberalization. We use detailed data on US tariff reductions during the most recent multilateral trade round to provide the first systematic evidence that the US’s PTAs were a stumbling block to its multilateral liberalization. We also provide evidence of reciprocity in multilateral tariff reductions that amplify the stumbling block effect.