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Regionalism as a Building Block for Multilateralism

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Published/Copyright: March 22, 2011
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Global Economy Journal
From the journal Global Economy Journal Volume 11 Issue 1

The well-known question whether regional trade agreements (RTAs) and the multilateral trading system (MTS) are “strangers, friends, or foes” (Bhagwati and Panagariya, 1996) has gained new importance with the widespread proliferation of RTAs in recent years. Based on an extensive data set which covers most of world trade over the past 60 years and about 240 regional trade agreements, we analyze the relationship between RTAs and the MTS by combining the gravity model framework with vector auto-regression analysis. Impulse-response-functions robustly suggest that multilateral trade liberalization responds in a significantly positive way to regional trade liberalization. We also find robust evidence that RTA liberalization Granger-causes GATT/WTO liberalization. Thus, our results indicate that RTAs do not undermine the MTS but serve as building blocks to multilateral trade liberalization.

Keywords: regionalism; multilateralism; trade agreement; gravity model
Published Online: 2011-3-22

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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https://doi.org/10.2202/1524-5861.1676
Keywords for this article
regionalism; multilateralism; trade agreement; gravity model

Articles in the same Issue

  1. Article
  2. Impact of Globalization on Income Distribution Inequality in 60 Countries
  3. Determinants of Investment by the Norwegian Sovereign Wealth Fund: GDP vs. Institutions
  4. Regionalism as a Building Block for Multilateralism
  5. What's New in Our World?
  6. Boeing and Airbus: Duopoly in Jeopardy?
  7. Reflections in Twenty Years of Political and Economic Change in Poland
  8. A Survey of Macro Damages from Non-Communicable Chronic Diseases: Another Challenge for Global Governance
  9. The Taylor Rule in Estimating the Performance of Inflation Targeting Programs: The Case of Turkey
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