In Search of WTO Trade Effects: Preferential Trade Agreements Promote Trade Strongly, But Unevenly

February 1, 2009

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Theo S. Eicher, and Christian Henn. In Search of WTO Trade Effects: Preferential Trade Agreements Promote Trade Strongly, But Unevenly, (USA: International Monetary Fund, 2009) accessed November 12, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The literature measuring the impact of Preferential Trade Agreements (PTA) and WTO membership on trade flows has produced remarkably diverse results. Rose's (2004) seminal paper reports a range of specifications that show no WTO effects, but Subramanian and Wei (2007) contend that he does not fully control for multilateral resistance (which could bias WTO estimates). Subramanian and Wei (2007) address multilateral resistance comprehensively to report strong WTO trade effects for industrialized countries but do not account for unobserved bilateral heterogeneity (which could inflate WTO estimates). We unify these two approaches by accounting for both multilateral resistance and unobserved bilateral heterogeneity, while also allowing for individual trade effects of PTAs. WTO effects vanish and remain insignificant throughout once multilateral resistance, unobserved bilateral heterogeneity, and individual PTA effects are introduced. The result is robust to the use of alternative definitions and coding conventions for WTO membership that have been employed by Rose (2004), Tomz et al. (2007), or by Subramanian and Wei's (2007).

Subject: Imports, North American Free Trade Agreement, Plurilateral trade, Trade agreements, Trade balance

Keywords: PTA coefficient, PTA dummy, PTA effect, Trade effect, WP, WTO effect

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/031
Stock No:

WPIEA2009031
ISBN:

9781451871784
ISSN:

1018-5941

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