Reciprocity In Free Trade Agreements
- Topics:
- WTO
- Tags:
- Agreement,
- Concession,
- Free-trade Agreement
- Source:
- World Bank Group
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Overview: This article uses detailed trade, tariff, and income data for countries involved in 91 trade agreements negotiated since 1980 to test for reciprocity in free trade agreements. The results offer strong evidence of reciprocity in North-North and South-South free trade agreements, but there is little empirical support for reciprocity in North-South trade agreements. It also finds evidence that large countries extract greater trade concessions from small countries. The results imply that there are incentives for countries to maintain protection in order to extract more concessions from trade partners. The evidence is consistent with a repeated game model of trade liberalization. The model presented shows that trade preferences granted are increasing in trade preferences received. This implies that countries can extract greater concessions from trade agreement members if they have higher external trade barriers. In addition, one finds that agreements between countries with similar cost structures are more likely to require reciprocity to be sustained, suggesting that reciprocity is more likely to be observed in North-North and South-South trade agreements.
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Format: PDF | Size: 249KB | Date: Jan 2003 | Pages: 35
