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Complements or Substitutes? Preferential and Multilateral Trade Liberalization at the Sectoral Level

Author

Listed:
  • Ando, Mitsuyo

    (Keio University)

  • Estevadeordal, Antoni

    (Inter-American Development Bank)

  • Volpe Martincus, Christian

    (Inter-American Development Bank)

Abstract

This paper explores the relationship between preferential and multilateral trade liberalization at the sectoral level using a unique dataset that includes data on most favored nation (MFN) and bilateral preferential tariffs at the 4-digit ISIC level for 11 Latin American countries over the period 1985–2005. We find evidence of heterogeneity across sectors. While in some industries, complementary effects between both kinds of trade liberalization are observed, in others no significant links are detected and—in a few cases—even substitutability seems to prevail. Variation across sectors appears to be systematically related to both import demand elasticities and countries’ sectoral comparative advantages.

Suggested Citation

  • Ando, Mitsuyo & Estevadeordal, Antoni & Volpe Martincus, Christian, 2009. "Complements or Substitutes? Preferential and Multilateral Trade Liberalization at the Sectoral Level," Working Papers on Regional Economic Integration 39, Asian Development Bank.
    • Handle: RePEc:ris:adbrei:0039
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    References listed on IDEAS

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    1. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Toward Nonmembers?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1531-1575.
    2. Nuno Limão, 2018. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 13, pages 353-371, World Scientific Publishing Co. Pte. Ltd..
    3. Broda, Christian & Greenfield, Joshua & Weinstein, David E., 2017. "From groundnuts to globalization: A structural estimate of trade and growth," Research in Economics, Elsevier, vol. 71(4), pages 759-783.
    4. Ornelas, Emanuel, 2005. "Trade creating free trade areas and the undermining of multilateralism," European Economic Review, Elsevier, vol. 49(7), pages 1717-1735, October.
    5. Stoyanov, Andrey, 2009. "Trade policy of a free trade agreement in the presence of foreign lobbying," Journal of International Economics, Elsevier, vol. 77(1), pages 37-49, February.
    6. Bohara, Alok K. & Gawande, Kishore & Sanguinetti, Pablo, 2004. "Trade diversion and declining tariffs: evidence from Mercosur," Journal of International Economics, Elsevier, vol. 64(1), pages 65-88, October.
    7. Martin Richardson, 2017. "Endogenous Protection and Trade Diversion," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 5, pages 107-127, World Scientific Publishing Co. Pte. Ltd..
    8. Baybars Karacaovali & Nuno Limão, 2018. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 14, pages 373-401, World Scientific Publishing Co. Pte. Ltd..
    9. Foroutan, Faezeh, 1998. "Does membership in a regional preferential trade arrangement make a country more or less protectionist?," Policy Research Working Paper Series 1898, The World Bank.
    10. James Proudman & Stephen Redding, 2000. "Evolving Patterns of International Trade," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 373-396, August.
    11. repec:bla:reviec:v:8:y:2000:i:3:p:373-96 is not listed on IDEAS
    12. Baldwin, Richard & Seghezza, Elena, 2007. "Are Trade Blocs Building or Stumbling Blocks? New Evidence," CEPR Discussion Papers 6599, C.E.P.R. Discussion Papers.
    13. Ornelas, Emanuel, 2008. "Feasible multilateralism and the effects of regionalism," Journal of International Economics, Elsevier, vol. 74(1), pages 202-224, January.
    14. Faezeh Foroutan, 1998. "Does Membership in a Regional Preferential Trade Arrangement Make a Country More or Less Protectionist?," The World Economy, Wiley Blackwell, vol. 21(3), pages 305-335, May.
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    Cited by:

    1. Richard Pomfret & Uwe Kaufmann & Christopher Findlay, 2010. "Are Preferential Tariffs Utilized? Evidence from Australian Imports, 2000-9," School of Economics and Public Policy Working Papers 2010-13, University of Adelaide, School of Economics and Public Policy.
    2. Richard Pomfret, 2013. "ASEAN's New Frontiers: Integrating the Newest Members into the ASEAN Economic Community," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(1), pages 25-41, June.
    3. Vlatka Bilas, 2018. "World Trade Organization and regional economic integrations: together in future or not?," International Studies, Libertas International University, vol. 18(1-2), pages 49-64.

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    More about this item

    Keywords

    Trade liberalization; regionalism; Latin America;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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