Preferential Trade Agreements: Development Trends and their Effects

International Journal of Economics and Management Studies
© 2022 by SSRG - IJEMS Journal
Volume 9 Issue 4
Year of Publication : 2022
Authors : Thi Hoang Oanh Nguyen
How to Cite?

Thi Hoang Oanh Nguyen, "Preferential Trade Agreements: Development Trends and their Effects," SSRG International Journal of Economics and Management Studies, vol. 9,  no. 4, pp. 1-16, 2022. Crossref,


Tremendously increasing PTAs attract many researchers to find out the reasons to form and their effects. This work has a long history. Beginning with the Vinerian question, the theory and empirical works related to this area are massive and perfect. This report provides an overview of the PT development trend, some stylized facts, purposes, and determinants to impact PTA formation, especially methods to find out the effects of PTAs on trade, economic growth, social welfare, etc., and the techniques to deal with the endogenous problems in analyzing process. The last but not least, this report also provides the recent trend in analysis related to PTAs’ effects.


PTAs’ effects, PTAs’ trends, PTA analysis.


[1] R. Adams, P. Dee, J. Gali, and G. McGuire, The Trade and Investment Effects of Preferential Trading Arrangements - Old and New Evidence, Productivity Commission Staff Working Paper, Canberra (2003).
[2] N. Aitken, The effect of the EEC and EFTA on European trade: A Temporal Cross-Section Analysis, American Economic Review. 63(5) (1973) 881–892.
[3] J. E. Anderson and Y. V. Yotov, Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990–2002, Journal of International Economics. 99 (2016) 279-298.
[4] J. E. Anderson and E. van Wincoop, Gravity with Gravitas: A Solution to the Border Puzzle, American Economic Review. 93(2003) 170-192.
[5] S. L. Baier and J. H. Bergstrand, On the Endogeneity of International Trade Flows and Free Trade Agreements, Manuscript.
[6] S. L. Baier and J. H. Bergstrand, Economic Determinants of Free Trade Agreements, Journal of International Economics. 64(1) (2004) 29-63.
[7] S. L. Baier and J. H. Bergstrand, Do Free Trade Agreements Increase Members' International Trade?, Journal of International Economics, 71(1) (2007) 72–95.
[8] S. L. Baier and J. H. Bergstrand, Estimating the Effects of Free Trade Agreements on International Trade Flows Using Matching Econometrics, Journal of International Economics. 77 (2009) 63–76.
[9] S. L. Baier, J. H. Bergstrand, and M. Feng, Economic Integration Agreements and the Margins of International Trade, Journal of International Economics. 93(2) (2014) 339-350.
[10] S. L. Baier, A. Kerr, Y. V. Yotov, Gravity, Distance, and International Trade, CESifo Working Paper, Series. 6357 (2017).
[11] S. L. Baier, Y. V. Yotov, and T. Zylkin, On the Widely Differing Effects of Free Trade Agreements: Lesson from Twenty Years of Trade Integration, Journal of International Economics. 116 (2019) 206-226.
[12] T. Besedeš, A Search Cost Perspective on Formation and Duration of Trade, Review of International Economics. 16(5) (2008) 835–849.
[13] T. Besedeš and T. Prusa, the Role of Extensive and Intensive Margins and Export Growth, Journal of Development Economics. 96(2) (2011) 371-379.
[14] A. B. Bernard, J. B. Jensen, S. J. Redding, and P. K. Schott, Firms in International Trade, Journal of Economic Perspectives. 21(3) (2007) 105-130.
[15] A. B. Bernard, J. B. Jensen, S. J. Redding, and P. K. Schott, the Margins of US Trade, American Economic Review. 99(2) (2010) 487-93.
[16] Carrère, Revisiting the Effects of Regional Trade Agreements on Trade Flows with Proper Specification of the Gravity Model, European Economic Review. 50 (2006) 223–247.
[17] M. X. Chen and S. Joshi, Third-Country Effects on the Formation of Free Trade Agreements, Journal of International Economics. 82 (2010) 238–248.
[18] J. Cheong, D. W. Kwak, and K. K. Tang, the Distance Effects on the Intensive and Extensive Margins of Trade Over Time, Empirical Economics. 50(2) (2015) 253-278
[19] W. M. Corden, Economies of Scale and Customs Union Theory, Journal of Political Economy. 80(3) (1972) 465-475.
[20] M. Dai, Y. V. Yotov, and T. Zylkin ., On the Trade-Diversion Effects of Free Trade Agreements, Economics Letters. 122(2) (2014) 321–325.
[21] P. Dutt, I. Mihov, and T. Van Zandt ., Does WTO Matter for the Extensive and the Intensive Margins of Trade?, Staff Working Paper; ERSD. (2011) 122-152.
[22] A. Dür, L. Baccini, and M. Elsig, the Design of International Trade Agreements: Introducing a New Dataset, The Review of International Organizations. 9(3) (2014) 353-375.
[23] P. Esposito, Trade Creation, Trade Diversion and Imbalances in the EMU, Economic Modelling. 60 (2017) 462–472.
[24] J. A. Frankel, Regional Trading Blocs in the World Economic System, Institute of International Economics, Washington DC. (1997).
[25] N. Foster, J. Poeschl, and R. Stehrer, The Impact of Preferential Trade Agreements on the margins of international trade, Economic Systems. 35 (2011) 84-97.
[26] K. Hayakawa, D. Hiratsuka, K. Shiino, and S. Sukegawa, Who Uses Free Trade Agreements? , Asian Economic Journal 27(3) (2013) 245-264.
[27] E. Helpman and P. Krugman, Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy, The Economic Journal, 96(381) (1986) 243. doi:10.2307/2233450.
[28] E. Helpman, M. Melitz, and Y. Rubinstein Estimating Trade Flows Trading Partners and Trading Volumes, The Quarterly Journal of Economics. 123(2) (2008) 441-487.
[29] H. Horn, G. Maggi, and R. W. Staiger, Trade Agreements as Endogenously Incomplete Contracts, American Economic Association. 100(1) (2010) 394-419.
[30] D. Hummels and P. J. Klenow, The Variety and Quality of a Nation's Exports, The American Economic Review, 95(3) (2005) 704–723.
[31] J. Hur and C. Par, Do Free Trade Agreements Increase Economic Growth of the Member Countries? World Development. 40(7) (2012) 1283–1294.
[32] T. J. Kehoe and K. J. Ruhl, How Important Are the New Goods Margin in International Trade?, Journal of Political Economy. 121(2) (2013) 358-392.
[33] T. Kohl, S. Brakman, and H. Garretsen, Do Trade Agreements Stimulate International Trade Differently? Evidence from 296 Trade Agreements, The World Economy. 39(1) (2016) 97-131.
[34] P. R Krugman, Scale Economies, Product Differentiation, and the Pattern of Trade, American Economic Review, 70(5) (1980) 950-959.
[35] P. R. Krugman, Is Bilateralism Bad? In International Trade and Trade Policy, MIT Press, (1991. a) 9-23.
[36] P. R. Krugman, The Move Toward Free Trade Zones, Economic Review, Federal Reserve Bank of Kansas City. (1991. b) 7-41.
[37] P. R. Krugman, P.R (1993), On the Relationship between Trade Theory and Location Theory, Review of International Economics, 1(2) (1993) 110-122.
[38] P. R. Krugman, M. Obstfeld, and M. J. Melitz, International Economics: Theory and Policy, Pearson, Tenth Edition. (2015)
[39] H. Lee and K. Itakura, U.S. Withdrawal from the Trans-Pacific Partnership and the Effects of Alternative Trade Integration Scenarios in the Asia-Pacific, The Japan Society for the Promotion of Science supports the finance, Grant Number JP16H03616. (2017).
[40] N. Limão, Preferential Trade Agreements, Handbook of Commercial Policy. 1(B) (2016) 279-367.
[41] C. S. Magee (2003), Endogenous Preferential Trade Agreements: An Empirical Analysis, Contributions in Economic Analysis & Policy. 2(1) (2003) doi:10.2202/1538-0645.1166
[42] C. S. Magee, New Measures of Trade Creation and Trade Diversion, Journal of International Economics. 75 (2008) 349–362.
[43] E. D. Mansfield and H. V. Milner, Votes, Vetoes, and the Political Economy of International Trade Agreements, Princeton University Press. (2012)
[44] Mattoo, A., Mulabdic, A., and Ruta, M. (2017), "Trade Creation and trade Diversion in Deep Agreements," World Bank, Policy Research Working Paper 8206.
[45] M. J. Melitz, The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity, Econometrica. 71 (2003) 1695–1725.
[46] R. A. Mundell, Tariff Preferences and the Terms of Trade, The Manchester School, 32(1) (1964) 1–13. doi:10.1111/j.1467-9957.1964.tb01029.x
[47] THO. Nguyen and W.C. Chen, The Lasting Effects of Economic Integration Agreements on Trade, Journal of Economics and Management. 15(2) (2019) 221-240.
[48] H. Oberhofer and M. Pfaffermayr, Estimating the Trade and Welfare Effects of Brexit: A Panel Data Structural Gravity Model , Canadian Journal of Economics/Revue Canadienne D’économique, 54(1) (2021) 338–375. doi:10.1111/caje.12494
[49] R. Scollay, J. Gilbert, and B. Bora Assessing Regional Trading Arrangements in the Asia-Pacific, Policy Issues in International Trade and Commodities Study Series No. 15, UNCTAD, United Nations, Geneva. (2001)
[50] A. Panagariya, Preferential Trade Liberalization: The Traditional Theory and New Developments, Journal of Economic Literature. 38(2) (2000) 287-331.
[51] R. Pomfret, The Economics of Regional Trading Arrangements, Clarendon Press, Oxford. (1997)
[52] S. Robinson and K. Thierfelder, Trade Liberalisation and Regional Integration: The Search for Large Numbers, The Australian Journal of Agricultural and Resource Economics. 46(4) (2002) 585–604.
[53] J. Tinbergen, Shaping the World Economy, Twentieth Century Fund, New York. (1962).
[54] K. Türkcan, Investigating the Role of Extensive Margin, Intensive Margin, Price and Quantity Components on Turkey's Export Growth during 1998-2011”, MPRA Paper No. 53292. (2014).
[55] J. Viner, The Customs Union Issue, Carnegie Endowment for International Peace, New York. (1950)
[56] S. Yang and I. Martinez-Zarzoso, A panel data analysis of trade creation and trade diversion effects: The case of ASEAN–China Free Trade Area, China Economic Review. 29 (2014) 138–151.
[57] Y. V. Yotov, R. Piermartini, J. A. Monteiro, and M. Larch, An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model, World Trade Organization, Geneva. (2016)
[58] B. Zissimos and D. Vines, Is the WTO’s Article XXIV a free trade barrier?, CSGR Working Paper No. 49/00. (2000) or