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The Suspense of Trade Agreements

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Abstract

Preferential trade agreements (PTAs) are signed between two or more countries following the conclusion of the negotiation process. The duration of this process varies considerably across existing trade agreements and ranges between 316 and 5125 days. This paper presents the consequences of the length of the negotiation process on trade growth. The contribution of this paper to the literature is threefold. Firstly, it includes as a determinant of trade a new variable that captures negotiations duration for the largest number of PTAs possible, covering all such events from January 1988 until October 2014. This unveils yet another previously ignored feature of PTAs (as trade driver) that leaves results based on a dichotomous PTA status in question. Secondly, this paper evaluates for the first time the anticipation effects of a PTA, concentrating solely on the negotiation period. Lastly, methodologically, this paper introduces for the first time in the international economics literature a dose response-function approach permitting continuous treatment and many non-treated units. The paper concludes that —ceteris paribus —lengthy PTA negotiations undermine trade growth.

Suggested Citation

  • Filip Tarlea, 2018. "The Suspense of Trade Agreements," KOF Working papers 18-440, KOF Swiss Economic Institute, ETH Zurich.
    • Handle: RePEc:kof:wpskof:18-440
    DOI: 10.3929/ethz-b-000253802
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    Cited by:

    1. Fontagné, Lionel & Santoni, Gianluca, 2021. "GVCs and the endogenous geography of RTAs," European Economic Review, Elsevier, vol. 132(C).

    More about this item

    Keywords

    Trade agreements; Negotiations; Enforcement; Uncertainty;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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