A large and growing number of countries participate in multiple preferential trade agreements (PTAs), which increasingly entail broad cooperation over policies extending far beyond trade barriers. I review the traditional and non-traditional motives for PTAs and their empirical determinants as well as their impacts on trade and on multilateral liberalization. I argue that the broad nature of modern PTAs, their substantial creation of bilateral trade and their modest effects on members’ tariffs, require us to augment the economic and policy structure of traditional models of PTAs as a static preferential tariff reduction. Throughout I draw lessons from the existing literature and point towards many interesting paths for future research, to advance our understanding of the causes of modern PTAs and their impacts on trade related outcomes and beyond.
Acknowledgements and Disclosures
I am very grateful for comments provided by the editors, Kyle Bagwell and Robert Staiger, as well as Stephanie Aaronson, Emily Blanchard, Chad Bown, Kyle Handley, Rob Johnson, Pravin Krishna, Michele Ruta, Emanuel Ornelas, Alan Winters and participants at the Handbook of Commercial Policy Conference. Marisol Rodriguez-Chatruc and Edith Laget provided excellent research assistance. I acknowledge financial support from the NSF under grant SES-1360780. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
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