Publication:
Reciprocity in Free Trade Agreements

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dc.contributor.authorFreund, Caroline
dc.date.accessioned2014-05-09T19:12:24Z
dc.date.available2014-05-09T19:12:24Z
dc.date.issued2003-05
dc.description.abstractThe author uses detailed trade, tariff, and income data for countries involved in 91 trade agreements negotiated since 1980 to test for reciprocity in free trade agreements. The results offer strong evidence of reciprocity in North-North and South-South free trade agreements, but there is little empirical support for reciprocity in North-South trade agreements. In particular, after controlling for other determinants of trade preferences, the results suggest that a one percent increase in preferences offered leads to about a one-half of a percent increase in preferences received in North-North and South-South trade agreements. Freund also finds evidence that large countries extract greater trade concessions from small countries. This leads to a modified form of reciprocity in North-South agreements. A large increase in access to a developing country market leads to only a small increase in access to a rich country market. The results imply that there are incentives for countries to maintain protection in order to extract more concessions from trade partners. But in general, such perverse incentives should be less of a concern in developing countries involved in North-South agreements because the value of a developing country tariff preference in terms of its effect on trade preferences from a rich country is quite small. The gains from unilateral liberalization are likely to far outweigh potential gains from using protection as a bargaining chip in trade negotiations. The evidence is consistent with a repeated game model of trade liberalization. The model presented shows that trade preferences granted are increasing in trade preferences received. This implies that countries can extract greater concessions from trade agreement members if they have higher external trade barriers. However, if a country's trade barriers are very large then the gains from reneging on the agreement in the short run will be high, making the agreement unenforceable despite offering long-term gains. So, there is a reciprocity-credibility tradeoff. High tariffs may allow countries to extract more concessions from potential trade agreement partners, but they also make the country less credible in actually implementing agreed tariff concessions. If a country's external tariff is very high relative to other countries, then it will not be able to commit credibly to any free trade agreement.en
dc.identifierhttp://documents.worldbank.org/curated/en/2003/05/2414871/reciprocity-free-trade-agreements
dc.identifier.doi10.1596/1813-9450-3061
dc.identifier.urihttps://hdl.handle.net/10986/18221
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 3061
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectFREE TRADE AGREEMENTS
dc.subjectINCOME DATA
dc.subjectRECIPROCITY
dc.subjectTARIFFS
dc.subjectTRADE NEGOTIATIONS
dc.subjectTRADE PREFERENCES
dc.subjectUNILATERAL LIBERALIZATION
dc.titleReciprocity in Free Trade Agreementsen
dspace.entity.typePublication
okr.crosscuttingsolutionareaJobs
okr.crossref.titleReciprocity in Free Trade Agreements
okr.date.doiregistration2025-04-10T10:08:50.280676Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2003/05/2414871/reciprocity-free-trade-agreements
okr.globalpracticeTrade and Competitiveness
okr.guid135991468739155471
okr.identifier.doi10.1596/1813-9450-3061
okr.identifier.externaldocumentum000094946_03070804204789
okr.identifier.internaldocumentum2414871
okr.identifier.reportWPS3061
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2003/07/22/000094946_03070804204789/Rendered/PDF/multi0page.pdfen
okr.sectorIndustry and trade :: Other domestic and international trade
okr.topicInternational Economics and Trade::Trade and Regional Integration
okr.topicInternational Economics and Trade::Free Trade
okr.topicInternational Economics and Trade::Trade Policy
okr.topicEconomic Theory and Research
okr.topicIndustry::Common Carriers Industry
okr.topicEnvironmental Economics and Policies
okr.topicInternational Economics and Trade::Rules of Origin
okr.unitTrade, Development Research Group
okr.volume1
relation.isAuthorOfPublication65ba4a02-ba22-5c96-8e04-6b9356d619e0
relation.isAuthorOfPublication.latestForDiscovery65ba4a02-ba22-5c96-8e04-6b9356d619e0
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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