Bilateral Preferential Trade Agreements Research Articles

Importer market power and preferential trade agreements: Empirical evidence

AbstractThis paper provides direct empirical evidence that preferential trade agreements (PTAs) are consistent with the terms‐of‐trade theory. Using PTAs that occur between 2001 and 2015, we first show a PTA is associated with being more likely if countries have greater importer market power over one another. Second, using recently available tariff data for 39 bilateral PTAs, we show high levels of importer market power lead to tariff cuts that are larger in magnitude when PTAs enter into force. These results provide a rationale for why PTAs are permitted by the World Trade Organization.

New deals ‘The Second After Leaving?’ IO withdrawal and bilateral trade agreements

The Brexit campaign was based on the idea that newly gained British sovereignty and flexibility in global trade governance would facilitate the quick negotiation of preferential trade agreements. We explore how long it may take for a state to negotiate bilateral preferential trade agreements to offset potential losses from International Organizations withdrawals. We address the question of ‘timing’, and discuss several mechanisms that delay or speed up the implementation of bilateral trade deals after exiting International Organizations. The empirical findings are based on quantitative data and models accounting for the likely simultaneous relationship between International Organizations exits and preferential trade agreements’ formation. We show that leaving economic organisations significantly lowers the likelihood of subsequent preferential trade agreements ratification. This effect wears out after about 1 year. This research has crucial implications for our understanding of International Organizations, state benefits’ stemming from their membership therein, bilateral trade deals, and international cooperation.

Way of Authoritarian Regional Hegemon? Formation of the RCEP From the Perspective of China

How has China contributed toward the conclusion of the Regional Comprehensive Economic Partnership (RCEP)? The extant literature tends to either undervalue China’s role or emphasizes the absence of China’s willingness to realize the RCEP. However, it is difficult to form region-wide multilateral preferential trade agreements (PTAs), such as RCEP, without any significant contribution from a regional hegemon, such as China. This paper, thus, argues that China has contributed significantly toward the conclusion of RCEP by engendering incentives for member countries to join through multiple cooperative structures. These cooperative structures involve China-led bilateral PTAs and international development forums, which include the Belt and Road Initiative and Asian Infrastructure Investment Bank. With the gradual shift from bilateral to multilateral PTAs and forum-linkage strategies, China turned to be more assertive in concluding the RCEP than in the early years of RCEP negotiations, as evidenced by the discourse of political and opinion leaders.

The Arbitration Panel Ruling on Ukraine’s Certain Wood Restrictions under the EU-UA Association Agreement

On 11 December 2020, the first Arbitration panel ruling in the European Union’s (EU’s) trade dispute under a bilateral preferential trade agreement was issued. This dispute concerns Ukraine’s export restrictions on raw timber and sawn wood of ten specific wood species referred to in the relevant Ukrainian law as ‘rare and valuable species’ and all ‘unprocessed timber’ for a period of ten years. The Arbitration panel found a violation by Ukraine’s ten-year export restriction on all ‘unprocessed timber’ of Article 35 of the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part (Association Agreement), while justified restriction on ‘rare and valuable species’ under Article XX(b) of the General Agreement on Tariffs and Trade 1994 (GATT 1994), as applied in Article 36 of the Association Agreement. This dispute was not only interesting as the first usage of the EU’s dispute settlement mechanism, but also because of the interpretation of the arbitration panel of ‘World Trade Organization (WTO)-extra’ obligation on the environment contained in the Association Agreement. The article reviews the case as well as analyses the EU’s claim and Ukraine’s defence. Trade law, Environment, EU law, Trade dispute, Arbitration, Dispute settlement, WTO, Export restrictions, Article XX, preferential trade agreement, timber

ПОЛОЖЕНИЯ ОБ ОХРАНЕ ОКРУЖАЮЩЕЙ СРЕДЫ В ПРЕФЕРЕНЦИАЛЬНЫХ ТОРГОВЫХ СОГЛАШЕНИЯХ: ПРОБЛЕМЫ ЭКОНОМИЧЕСКОГО ЭФФЕКТА И ЭКОЛОГИЧЕСКОЙ ЭФФЕКТИВНОСТИ

The inclusion of provisions on various aspects of environmental protection into multilateral and bilateral preferential trade agreements has become a traditional practice for most developed and developing countries. The present paper provides an overview of a number of foreign studies on specific problems of economic effect and environmental efficiency of the respective provisions.

The Impact of Indonesia-Bangladesh Railway Cooperation on the Establishment of Bilateral Preferential Trade Agreements

This research discusses the railway cooperation between Indonesia and Bangladesh which is motivated by the interest of Bangladesh to revitalize railways and increase the domestic demand for railways. This research aims to find out why the Indonesia-Bangladesh cooperation in the railway sector has a significant impact on the formation of the Indonesia Bangladesh Preferential Trade Agreement (IB-PTA) in 2018. This research using interview and literature study methods. The theory used in this research is the theory of interdependence and economic integration. The conclusion of this research is that the Indonesia-Bangladesh railroad cooperation has a significant impact, causing a sense of mutual dependence. The two countries finally agreed to form economic integration in the form of PTA in order to improve the economies of each country.

The WTO is not passé

Abstract The empirical literature on the effect of trade agreements has reached a consensus that WTO effects are insignificant or modest at best especially compared to the robust and strong positive effect of preferential trade agreements (PTAs) on bilateral trade (Rose, 2004; Eicher and Henn, 2011; Baier and Bergstrand, 2007, 2009). In this paper, we show that previous work that reports “average treatment effects” on trade flows fails to account for the heterogeneity in the effects of trade arrangements over time, leading to an underestimation of the WTO effect on bilateral trade. We present semi-parametric estimates of the impact of WTO membership, allowing for heterogeneity of WTO effects over time. We find evidence for strong WTO effects over time, with the WTO effects increasing almost monotonically with years of membership. In fact, in the long-term, the magnitude of the WTO effect exceeds those of the PTA effects. We also find that the strongest WTO effect over time is for destinations that are developing countries that underwent rigorous accession procedures to join the WTO. Disaggregating PTAs into bilateral, multilateral, and deep integration (customs union, common markets, and economic union), we find that the long-term effects of WTO membership dominate bilateral and multilateral PTAs but fall short of deep integration arrangements. Finally, we show that WTO membership increases both the extensive and intensive margins of trade over time, with a stronger impact on the former. Our results are consistent with gradual trade liberalization and declining trade policy uncertainty over time, following WTO membership.

The EU’s Request for Arbitration Under the EU-Ukraine Association Agreement

On 20 June 2019, the European Union’s (EU’s) Delegation to Ukraine submitted a Note Verbale to the Ministry of Foreign Affairs of Ukraine requesting ‘on behalf of the European Union, the establishment of an arbitration panel pursuant to Article 306 of the Association Agreement of 21 March 2014 between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part’. The dispute concerns Ukraine’s export restrictions on timber and unsawn wood of certain species, as well as on unprocessed timber of all species, for a period of ten years. While the restrictions appear to be legally difficult to justify for Ukraine, the more interesting and noteworthy element to this dispute is that it is the first trade dispute that the EU is pursuing under a bilateral preferential trade agreement, even though it relates to disciplines that mirror World Trade Organization (WTO) rules and could as well be pursued in the framework of WTO dispute settlement. The article reviews the case and discusses the significance and the EU’s deliberate choice of dispute settlement within the context of the trade agreement. Trade law, EU trade law, Trade dispute, International trade dispute settlement, Trade Agreements, Dispute Settlement, Arbitration, WTO Dispute Settlement, Export restrictions, Forum clauses

Multilateral stability and efficiency of trade agreements: A network formation approach

AbstractWe study the endogenous network formation of bilateral and multilateral trade agreements by means of hypergraphs and introduce the equilibrium concept of multilateral stability. We consider multicountry settings with a firm in each country that produces a homogeneous good and competes as a Cournot oligopolist in each market. Under endogenous tariffs, we find that a multilateral trade agreement governing the rules and norms of tariff setting, that is the WTO/GATT regime itself, together with a bilateral preferential trade agreement (PTA) is multilaterally stable. We also find that the existence of the WTO is necessary for the stability of the trading system. We further analyse the impact of PTAs on multilateral tariffs within the WTO. We find that the formation of PTAs increases countries' incentives for multilateral tariff reduction.

Taiwan–ASEAN Trade Relations: Trade Structure and Trade in Value Added

How has the Taiwan–Association of Southeast Asian Nations (ASEAN) trade evolved without having official diplomatic relations? Using several international commodity classification systems and trade pattern indices, we argue that despite political constraints, Taiwan–ASEAN trade has rapidly expanded with a significant concentration on manufacturing and intermediate goods, embodied with high-technological content. Also, by employing the Organisation of Economic Co-operation and Development’s (OECD) database on trade in value added (TiVA), we assess that Taiwan and ASEAN have become important partners in terms of trade in value addition. Nevertheless, Taiwan is seemingly lagging behind Northeast Asian economies in strengthening linkages with ASEAN over regional production networks and TiVA. This possibly results from the absence of a bilateral preferential trade agreement between Taiwan and ASEAN so far. Given the low possibility of reaching such an agreement in the near future, it is suggested that Taiwan and ASEAN should employ dynamic approaches to reap greater bilateral trade expansion and other economic benefits.

Brexit and Preferential Trade Agreements: Issues of Termination and Survival Clauses

This article examines the fate of preferential trade agreements (PTAs) concluded between the United Kingdom (UK), the European Union (EU) and third States after Brexit. It examines EU-only and mixed PTAs separately. Regarding mixed PTAs, it is argued that Brexit will not lead to their automatic termination. The UK will possess all rights and obligations under these agreements, unless they contain provisions limiting their scope, such as respective powers and territorial application clauses, often found in bilateral mixed PTAs. The effect of the former is that the UK will remain Party to mixed PTAs but will not fall within the personal scope of rights and obligations thereunder. This situation gives rise to a series of questions, among others, whether the UK will be able to terminate the treaties and whether survival clauses will be triggered. It is argued that the UK will be able to rely on PTAs’ termination provisions and potentially Article 62 VCLT (fundamental change in circumstances), and that survival clauses are also triggered by permanent de facto termination events. Regarding EU-only treaties, it is argued the UK will be neither bound thereby under international law nor obliged to act in conformity with them under European law.

Strategic choices of bilateral and multilateral preferential trade agreements: empirical analysis

AbstractThe rapid proliferation of preferential trade agreements (PTAs) has prompted numerous studies on why states seek PTAs. However, very little research examines why states vary in choosing different forms of PTAs, while states’ decisions to enter bilateral or multilateral PTA affect the global, regional, and national political economies. This paper thus finds global patterns regarding which pairs of states are more likely to enter bilateral or multilateral PTAs. Based on a wide range of existing research, the paper begins with hypothesizing different effects of economic and political factors that give rise to these PTAs during the last two decades. The empirical analysis then tests these hypotheses. The result shows stark differences in pairs of states joining the two types of PTAs. Bilateral PTAs are more likely to develop between democratic states with a large market size and the World Trade Organization (WTO) membership. Multilateral PTAs tend to form between less democratic states with greater political affinity.

The WTO Matters Strongly Over Time, But Unevenly Across Countries

The empirical literature on the effect of trade agreements has reached a consensus that WTO effects are insignificant or modest at best especially compared to the robust and strong positive effect of preferential trade agreements (PTAs) on bilateral trade (Rose, 2004; Eicher and Henn, 2011; Baier and Bergstrand, 2007, 2009). In this paper, we show that previous work that reports “average treatment effects” on trade flows fails to account for the heterogeneity in the effects of trade arrangements over time, leading to an underestimation of the WTO effect on bilateral trade. We present semi-parametric estimates of the impact of WTO membership, allowing for heterogeneity of WTO effects over time. We find evidence for strong WTO effects over time, with the WTO effects increasing almost monotonically with years of membership. In fact, in the long-term, the magnitude of the WTO effect exceeds those of the PTA effects. We also find that the strongest WTO effect over time is for destinations that are developing countries that underwent rigorous accession procedures to join the WTO. Disaggregating PTAs into bilateral, multilateral, and deep integration (customs union, common markets, and economic union), we find that the long-term effects of WTO membership dominate bilateral and multilateral PTAs but fall short of deep integration arrangements. Finally, we show that WTO membership increases both the extensive and intensive margins of trade over time, with a stronger impact on the former. Our results are consistent with gradual trade liberalization and declining trade policy uncertainty over time, following WTO membership.

How Do Global Trade Rules Evolve? Strategic Sequencing in International Economic Law

How and why do global trade rules evolve? When the EU revised the investment chapter of its recent trade deal with Canada it was widely believed that the amendments were motivated by concern over the design of another agreement: the yet-to-be-completed Transatlantic Trade and Investment Partnership with the United States. Yet, there is no formal link between those two agreements. Indeed, the literature generally sees preferential trade agreements (PTAs) as products of signatories' bilateral relations. This article challenges this view. I argue that past agreements create precedent that shapes subsequent agreements, and that policymakers act accordingly. Specifically, I argue that the sticky nature of legal commitments creates incentives for states to sequence agreements, signing ambitious PTAs with less important partners to establish model agreements for use with more important partners. A two-stage regression analysis on the sequencing and design of bilateral PTAs from 1965 to 2016 supports this argument. For states that care most about enforcing global trade rules, agreements that are under-predicted by an economic and political gravity model tend to be more ambitious, and signed sooner. These same states are more likely to 'ratchet' agreements, progressively increasing the depth of their agreements over time. This is further borne out in evidence from recent agreements negotiated by the EU and New Zealand: agreements with less-important partners have been seized on as opportunities to innovate. Legal language has a way of sticking around, and negotiators know it. Thus, states sign agreements with an eye to the future.

The Southern African Development Community Trade Legal Instruments Compliance with Certain Criteria of GATT Article XXIV

Article XXIV of the General Agreement on Tariffs and Trade (GATT) lays down the legal principles with which regional trade agreements have to conform. Based on these principles, WTO members have the mandate to determine the legality of Regional Trade Agreements (RTAs) under the GATT. Article XXIV permits both regional and bilateral preferential trade agreements leading to the formation of customs unions and free trade areas, and seeks to integrate them in the multilateral trading system envisioned for the world. SADC is an RTA created under this Article. Notwithstanding the controversies surrounding the provisions and interpretation of Article XXIV, this paper seeks to establish the extent to which the SADC Protocol on Trade and free trade area comply with WTO rules. An analysis of selected Article XXIV provisions and the SADC Trade Protocol provisions will be undertaken in trying to establish this compliance.

Инвестиционные эффекты ПТС: качество соглашений имеет значение

We develop a theoretical model of international capital movement in form of FDI. Our theoretical model describes non-linear impact of heterogeneous preferential trade agreements (PTAs) on FDI. In order to quantify PTAs heterogeneity we develop a methodology of PTAs classification. Using the methodology, we quantified a quality of more than 200 PTAs (out of 380 existing globally). Our model predicts that impact of PTA on FDI will depend on observed quality of PTA while marginal investment effect of PTAs will decrease with PTAs' quality improvement. Empirically, we show that use of simple dummy for PTAs without taking into account PTAs heterogeneity and the non-linear effects of PTA on FDI overestimate the investment effects of PTAs up to 100%. Bilateral PTAs within CIS insignificantly affects FDI between countries - maximum investment effects of such agreements are estimated at 19%. Multilateral PTAs have a significant investment effects: FDI between signatories of multilateral PTAs rose up to 71%.

ECONOMIC DETERMINANTS OF THE TIMING OF PREFERENTIAL TRADE AGREEMENT FORMATIONS AND ENLARGEMENTS

Preferential trade agreements (PTAs) have proliferated over the past 60 years. While a small number of recent studies have examined empirically the economic determinants of the likelihood of a pair of countries having a PTA, this study explains empirically the timing of all PTA formations and enlargements from 1950 through 2006 using duration analysis. Our main and novel goal is to predict (in‐ and out‐of‐sample) a substantive share of these 1,560 PTA events using a parsimonious model with mainly economic variables, taking selection dynamics into account. Our analysis reveals that we can predict correctly in‐sample the actual year of entry into force for 26% of the 1,560 bilateral PTA formations/enlargements in the period 1950–2006 among 10,518 pairings of 146 countries using only a few economic and political variables. Moreover, we can predict correctly in‐sample 57% of these PTA events within a 10‐year window leading up to the event using this model. The model also performs well out‐of‐sample for the near term (82%), but not if the out‐of‐sample period is very long. We conclude with an evaluation of the model's ability to predict the timing of the North American Free Trade Agreement, the European Union's formation and enlargements, and the model's ten most likely post‐2006 PTA events. (JEL F14, F15)

An Assessment of the Zimbabwe-Namibia Bilateral Preferential Trade Agreement

An Assessment of the Zimbabwe-Namibia Bilateral Preferential Trade Agreement

The TISA Initiative: An Overview of Market Access Issues

The plurilateral negotiations on a Trade in Services Agreement ( TISA) have attracted much attention in trade policy circles. Policy and economic implications are intensely debated given the number and economic importance of participants. This article aims to provide insights into the market access issues arising in such negotiations. Should TISA negotiations result in participants exchanging the best commitments they have so far undertaken in their preferential trade agreements (PTAs) - a reasonable starting point -,TISA market access commitments would go well beyond commitments under the General Agreement on Trade in Services (GATS) and services offers tabled in the Doha Round. While this would be in itself a significant outcome (especially in terms of predictability and stability), we also highlight, however, that the real economic benefits would be reduced by the fact that a number of participants have already exchanged significant concessions amongst themselves through bilateral PTAs. Further, and more importantly, exchanging 'best PTA' commitments would not meet the participants' most important export interests. These have often remained unaddressed in many of the previous bilateral negotiations or involve countries not currently participating in TISA. Addressing better these export interests would require going beyond an exchange of 'best PTA' commitments among TISA participants - with the more difficult policy and negotiating decisions that this implies - and/or seeking to expand the group of participants. We also discuss the different forms that such a plurilateral agreement may take vis-à-vis the WTO framework.

Beyond Market Access?: The Anatomy of ASEAN’s Preferential Trade Agreements

This article seeks to enhance the understanding of ASEAN's external Preferential Trade Agreements (PTA) in context of the recent growth of economic regionalism in East Asia. The article advances a comparison of the content of ASEAN's five plurilateral PTAs with China, Korea, Japan, India, Australia, and New Zealand with the status quo of ASEAN's internal economic integration. In a second step, the article compares ASEAN's plurilateral agreements and ASEAN's internal integration with the content of six bilateral PTAs that individual ASEAN Member States have concluded with Japan. The empirical findings demonstrate that the ambition of ASEAN's five plurilateral agreements finds its upper limits in the substantive content of ASEAN's internal economic integration. Within these limits, the coverage and depth of commitments varies considerably and corresponds to the intensity of trade between ASEAN and the respective external partner. Moreover, the comparison shows that bilateral PTAs between six individual ASEAN Member States and Japan go significantly beyond the status quo of ASEAN's internal integration and exceed the coverage and depth of ASEAN's external plurilateral PTAs. The author contends that the coverage and depth of ASEAN Member States' plurilateral PTAs is limited by the structural heterogeneity of the signatories and, as a result, a relatively high diversity of policy preferences. Bilateral PTAs between ASEAN Member States and the same external partners result in deeper commitments than the plurilateral accords because of both a higher common denominator among the parties to the agreements and the free-rider problem that persists in plurilateral negotiation settings. Moreover, it is argued that the coverage and depth of the agreements is a function of the intensity of trade among the parties: high trade intensity results in deeper and more comprehensive agreements that tackle twenty-first century trade issues, whereas low trade intensity results in shallow agreements that aim to reduce first-generation trade barriers. These hypotheses, which are fully verified by the empirical findings of this study, allow for conclusions about the role of ASEAN Member States - collectively and individually - in current and future economic integration initiatives.