Economics, Econometrics and Finance
4 years ago

Tariff bindings shape global trade agreements, paving the way for free trade.

SSRN Electronic Journal
Tariff Bindings and the Dynamic Formation of Preferential Trade Agreements
James Lake, Moïse Nken, Halis Murat Yildiz

Paper Summary

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Multilateral tariff binding liberalization affects the formation of Preferential Trade Agreements (PTAs). High bindings lead to Free Trade Agreement (FTA) members excluding non-members, while low bindings lead to non-members free riding. Initially, tariff binding liberalization results in Custom Union (CU) formation, hindering global free trade. However, further liberalization leads to FTA formation, promoting global free trade.