Causes and effects of PTAs: Is it all about preferences?

A vast literature in economics and political science focuses on the causes and effects of preferential trade agreements – and in particular on the way that border measures, such as tariffs, impact trade flows among countries both inside and outside such agreements. Often referred to as the “standard analysis of preferential trade agreements”, this literature is discussed in detail in Sections C.1 and C.2. However, many recent regional agreements have moved beyond border measures to include deeper forms of rules and institutions that can only be partly understood by the standard analysis of preferential trade. An examination of the economic motives – and the key issues – that lie behind these deeper integration agreements is discussed in Section C.3.