Are Free Trade Agreements contagious?

Abstract

This paper presents empirical evidence on the extent to which FTAs are "contagious", using empirical techniques inspired by the study of contagion in exchange rate crises. Using different econometric techniques, it tests the null hypothesis that the signing of an FTA between one nation's trade partners has no affect on the probability of the nation signing a new FTA. The hypothesis is tested against other political, economical and geographical determinants of the FTA formation previously stated in the literature, finding evidence that the contagion phenomenon is present in different specifications and samples.

The Evolution and Reshaping of Globalization: A Perspective Based on the Development of Regional Trade Agreements

“…The intrinsic mechanism is that governments are assumed to maximize their citizens' economic welfare, and the net welfare gain or loss of two countries from forming an RTA depends on the trade creation versus trade diversion effects; when the former is greater than the latter, an RTA will be formed. Many scholars have verified these conclusions with panel data from a dynamic perspective (Egger and Larch, 2008;Baldwin and Jaimovich, 2012;Baier et al, 2014).…”

Endogenous Formation of Free Trade Agreements: Evidence from the Zollverein's Impact on Market Integration

“…3 Price data contains important information on trade and its effects (e.g., Stolper and Samuelson 1941) and has been extensively applied in the literature (O'Rourke and Williamson 1999). Information on the volume of trade becomes available for these areas only at a later time (Wolf,4 On the endogeneity of trade agreements, see the Baldwin (1993), Baldwin and Jaimovich (2012). falling anyway in the nineteenth century for other reasons, then reverse causation could be a concern.…”

A new player in the international development community? Chile as an emerging donor

“…Chile is an open economy with exports that are around one third of GDP, and imports of a similar magnitude (World Bank, 2016). The country has championed the elimination of trade barriers through a network of regional and bilateral FTAs, which has transformed it into one of the countries with the highest number of such agreements in the world (Baldwin & Jaimovich, 2012). Several analysts agree that those commercial interests have been the main drivers of Chilean recent foreign policy (Briones & Dockendorff, 2015;Oyarzún, 2013;Feldmann et al, 2011;Fermandois, 2011;Wilhelmy & Durán, 2003).…”

“…While previous studies have analyzed other LAC donors, mainly Brazil and Venezuela (Burges, 2014;Walz & Ramachandran, 2011;Burges, 2007), only a few analyses of Chile exist, and those mainly focus on some specific programmes (Feldmann, Lengyel, Malacalza, & Ramalho, 2011;Rojas, 2011;Baranyi, Feldmann, & Bernier, 2015). The Chilean case is interesting as it is one of the richest nations in the region, one of the two OECD LAC members, and one of the countries with the largest network of Free Trade Agreements (FTAs) in the world (Baldwin & Jaimovich, 2012). Nevertheless, Chile has been diplomatically partially ostracized within the region, as its active open regionalism has not fitted well into the main regional blocs formed during the last decades (Wilhelmy & Durán.…”