This paper studies the implications of Preferential Trade Agreements (PTAs) proliferation. Using counterfactual estimation, we disentangle the treatment effect of one PTA on members’ trade and real income, from the externalities created by concurrent trade policy changes. Results, focusing on the MENA region between 2001 and 2007, reveal that the concurrent trade policy changes greatly weakened the trade creation effects of a PTA taken in isolation. However, countries do gain in real income from signing PTAs, even in the cases where trade creation is small; while non-members are negatively impacted. Thus, we confirm that most countries have benefited overall from tariff reductions in our period of study, but we show that this is true only because PTAs proliferate: countries offset adverse effects of non- membership, by signing new agreements with existing PTA members.
- International trade,
- Armington hypothesis,
- Counterfactual Estimation,
- Trade creation and diversion
Available at: http://works.bepress.com/sami_bensassi/7/