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RTAs Formation and Trade Policy
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1725-6704
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EUI ECO; 2007/59
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SALA, Davide, RTAs Formation and Trade Policy, EUI ECO, 2007/59 - https://hdl.handle.net/1814/7692
Abstract
From the mid-60s to the mid-80s there has been a gradual but fundamental change
in the nature of trade protection. International trade has become increasingly restricted
by quotas and other nontariff barriers, as the level of tariffs have fallen and governments
have devised other forms of protection for sectors facing increased foreign competition.
The paper shows such non-tariff barriers have very different effects and implications
from tariff for the welfare outcome of a regional integration agreement. Indeed, binding
quotas, differently from tariffs, succeed to preserve the trade volumes with the rest of
the world, and lead to welfare improving customs unions and free trade areas since trade
between the partners is not expanded at the expense of trade with the outside world.
By relating the existence of welfare enhancing regional integration to the systematic
change in the type of trade policy conducted by most countries, this paper emphasizes
that the desirability of piecemeal reforms has increased through time and justifies a
renewed and grown policy interest in preferential trade in the 90s, when NTBs had a
greater weight in trade policies. This can contribute to explain the spurt of regionalism
observed in the data.