Trade Policy

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Globalisation is not an inevitable process: for example, after decades of trade liberalisation nations descended into rounds of tariff escalation during the Great Depression. Policy is therefore important not only in shaping the response to globalisation but also in influencing its future pace and direction. We seek to understand the causes and consequences of trade policy, including the political economy of trade policy and the prospects for maintaining the political coalition for further trade liberalisation.

The world has experienced a marked tendency toward trade integration since the early 1990s, and the main vehicle for this enhanced integration has been the formation of regional trade agreements (RTAs). Gains from these agreements stem from resources flowing to their most productive uses and from lower consumer prices. Nonetheless, with preferential liberalisation gains from trade are not guaranteed. A key issue is the potential for trade diversion, or whether production shifts from efficient external suppliers to inefficient members. The magnitude of diversion affects the viability of the agreement ex ante and external trade policies ex post, such that governments may have incentives to adjust external tariffs subsequent to the formation of an RTA formation.

Research at the CEP examines how the ASEAN Free Trade Agreement has affected trade with non-members and external tariffs "facing non-members" (Discussion Paper No 930). There is no evidence that preferential liberalisation has led to lower import growth from non-members; moreover, preferential liberalisation within ASEAN also promotes external tariff liberalisation. Similar effects are observed in Latin America (Discussion Paper No 868, final version published on November 2008 in the Quarterly Journal of Economics).

The relationship can also go the other way around, with multilateral liberalisation shaping future preferential liberalisation. Indeed, CEP research finds that the goods whose imports the United States negotiated the largest MFN tariff reductions during the Uruguay Round of the GATT (1986-1994) were also the goods which the United States introduced more frequently in the RTAs it formed subsequently to the Uruguay Round (Discussion Paper No 973). Hence, past success of multilateralism seems at least partly responsible for the current wave of regionalism.

These and other related topics have been addressed by several recent CEP articles:

CEP Discussion Paper
Is the WTO Article XXIV Bad?
Monika  Mrázová,  David  Vines,  Ben  Zissimos,  November 2010
Paper No' CEPDP1021: Read Abstract | Full paper

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CEP Discussion Paper
Sequential Exporting
Facundo  Albornoz,  Hector  Calvo-Pardo,  Gregory  Corcos,  Emanuel  Ornelas,  March 2010
Paper No' CEPDP0974: Read Abstract | Full paper

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CEP Discussion Paper
The 'Emulator Effect' of the Uruguay Round on US Regionalism.
Marco  Fugazza,  Frédéric  Robert-Nicoud,  March 2010
Paper No' CEPDP0973: Read Abstract | Full paper

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CEP Discussion Paper
Regional Trade Agreements
Caroline  Freund,  Emanuel  Ornelas,  December 2009
Paper No' CEPDP0961: Read Abstract | Full paper

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CEP Discussion Paper
The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers
Hector  Calvo-Pardo,  Caroline  Freund,  Emanuel  Ornelas,  May 2009
Paper No' CEPDP0930: Read Abstract | Full paper

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CEP Discussion Paper
International Trade Integration: A Disaggregated Approach
Natalie  Chen,  Dennis  Novy,  January 2009
Paper No' CEPDP0908: Read Abstract | Full paper

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CEP Discussion Paper
Protection and International Sourcing
Emanuel  Ornelas,  John L.  Turner,  December 2008
Paper No' CEPDP0900: Read Abstract | Full paper

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CEP Discussion Paper
A 'New Trade' Theory of GATT/WTO Negotiations
Ralph  Ossa,  June 2008
Paper No' CEPDP0877: Read Abstract | Full paper

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CEP Discussion Paper
Does Regionalism Affect Trade Liberalization Towards Non-Members?
Antoni  Estevadeordal,  Caroline  Freund,  Emanuel  Ornelas,  May 2008
Paper No' CEPDP0868: Read Abstract | Full paper

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CEP Discussion Paper
International Trade, Minimum Quality Standards and the Prisoners' Dilemma
Dimitra  Petropoulou,  February 2008
Paper No' CEPDP0858: Read Abstract | Full paper

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CEP Discussion Paper
A Swing-State Theory of Trade Protection in the Electoral College
Mirabelle  Muûls,  Dimitra  Petropoulou,  February 2008
Paper No' CEPDP0849: Read Abstract | Full paper

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CEP Discussion Paper
A Simple Model of the Juggernaut Effect of Trade Liberalisation
Richard E.  Baldwin,  Frédéric  Robert-Nicoud,  January 2008
Paper No' CEPDP0845: Read Abstract | Full paper

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