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Item type:Publication, Intra-bloc tariffs and preferential margins in trade agreements(Elsevier B.V., 2022-09-01)We study how countries choose intra-bloc tariffs and preferential margins in Preferential Trade Agreements (PTAs). Our model indicates that countries should set systematically lower preferential margins when the bloc takes the form of a free trade area, relative to a customs union. Moreover, in customs unions (but not necessarily in free trade areas) preferential margins should increase with the supply of partner countries and decrease with the level of preferential imports. These relationships reflect, respectively, the internalization of political-economy goals within the bloc and the desire to curb trade diversion. Using a sample that covers most PTAs formed by Latin American countries in the 1990s, we find empirical support for each of those predictions. These findings rationalize why governments often keep intra-bloc duties strictly positive. We show that this tends to worsen the welfare consequences of PTAs, and that requiring the elimination of internal tariffs would be socially desirable. - Some of the metrics are blocked by yourconsent settings
Item type:Publication, The impact of free trade agreements on the tariffs of nonmember countries: evidence from NAFTA(Springer Science+Business Media, 2026-01-12)How do free trade agreements (FTAs) affect the tariffs imposed by nonmember countries? In light of the significant attention devoted to and the proliferation of FTAs in recent decades, this is a critical yet mostly overlooked question. Using a political-economy model of trade protection, I show theoretically that if the political bias of the governments is large enough, an FTA will cause an increase in the tariffs of nonmembers via a larger supply and higher profit rise generated by those tariffs. I test and confirm the model’s predictions focusing on the case of the North American Free Trade Agreement. The results highlight a new type of mechanism through which FTAs may affect the tariffs of nonmember countries and world welfare.