Preferential Trade Agreements Recent Theoretical and Empirical Developments

The world is witnessing an increase in the number of preferential trade agreements (PTAs) being negotiated between countries. These agreements provide a set of favorable trade conditions between the participating countries to increase their economic cooperation. In recent years, there have been many theoretical and empirical developments highlighting the benefits, concerns and effects of PTAs.

Over the years, there have been many theoretical models of how PTAs can affect international trade. The traditional view suggests that by lowering the tariffs, PTAs can increase the volume of trade between the participating countries. However, the role of non-tariff measures (NTMs) has become important in recent years. NTMs are regulatory measures that are used to protect consumers, public health, and the environment, which can affect trade flows. Empirical studies suggest that the use of NTMs has increased in PTAs, and there is evidence to show that these agreements can have a positive effect on trade even with the presence of NTMs.

Another theoretical development in PTAs is the formation of mega-regional trade agreements such as Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Regional Comprehensive Economic Partnership (RCEP). These mega-regional agreements have been the subject of considerable debate in recent years. While some argue that they can bring significant economic benefits, others point out the potential negative effects on smaller economies.

Empirical studies suggest that PTAs can have a positive effect on economic growth, trade creation and job creation. However, these benefits may not be evenly distributed across all countries. Larger economies, with more bargaining power, may benefit disproportionately from PTAs. This can lead to concerns about smaller countries being left behind.

There are also concerns about the potential negative effects of PTAs. Some argue that these agreements could lead to a race to the bottom in terms of labor and environmental standards, as countries compete to attract investment. Others point out that PTAs can lead to increased market concentration, reducing competition and leading to oligopolistic market structures.

Overall, recent theoretical and empirical developments have shed light on the complex effects of PTAs. While there are benefits to these agreements, concerns remain about their potential negative effects. As PTAs continue to be negotiated, it will be important to ensure that they are balanced and benefit all countries involved.

In conclusion, the increasing number of PTAs being negotiated between countries has led to many theoretical and empirical developments highlighting the benefits, concerns, and effects of these agreements. While there are potential negative effects, there are also significant economic benefits to be gained from PTAs. As such, it is essential for policymakers to consider all factors and ensure that these agreements are balanced and benefit all countries involved.