Preferential Trade Deals Boost Unilateral Tariff Cuts, Benefiting Consumers Worldwide
The study looked at how joining regional trade agreements affects a country's decision to lower its import taxes. They analyzed data from ten Latin American nations from 1990 to 2001. The results show that when a country cuts tariffs for its regional partners, it also tends to lower tariffs for other countries not in the group. If a nation gives trade perks to important partners, it's more likely to reduce tariffs for all. But, interestingly, this link doesn't happen in customs unions. Overall, the study suggests that fears of regional trade deals hurting overall trade openness may not be valid.