Free Trade Agreements Slash External Tariffs, Boosting Global Economic Integration
The article explores how free trade agreements affect external tariffs. The researchers found that when countries form FTAs, tariffs on non-members decrease. They also discovered that when tariffs are determined based on the agreement, it can make the FTA unfeasible if there are expectations of tariff reductions. However, if domestic industries that compete with imports are small, an FTA is more likely to be feasible compared to fixed tariffs.