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Competitive Liberalization or Competitive Diversion? The Relationship between Preferential Trade Agreements and the Multilateral Trading System

Paper:ewp-it/0305002
From:    
Date: Fri, 9 May 2003 08:16:31 -0500

Title: Competitive Liberalization or Competitive Diversion? The Relationship between Preferential Trade Agreements and the Multilateral Trading System
Author: Soamiely Andriamananjara (USITC)
Contact:
Comments: Type of Document - Word - PDF; prepared on IBM PC ; to print on HP/PostScript/Franciscan monk; pages: 14 ; figures: included
Keywords: competitive liberalization Regionalism Multilateralism
JEL: F02, F15, F13
EWPA-references: /data/ftp/econ- wp/incoming/competitivediscrimination.pdf
Report-no: SA-2003-1

Abstract:

This article discusses whether the current proliferation of preferential trade agreements-the so-called "competitive liberalization"-encourages evolution toward multilateral free trade. It argues that countries pursuing preferential trade initiatives are in pursuit of the economic rents resulting from the trade diversion associated with trade preference (or discrimination). By lowering the margin of preference, multilateral trade liberalization reduces those rents and is likely to be resisted by members of trade-diverting preferential blocs. Future preferential agreements should be designed to be less trade diverting in order to be more compatible with the objective of global free trade.

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