Preferential Trading Arrangement: Endogenous Response of the Excluded Country

摘要

This paper presents one channel through which the creation of a Preferential211u001eTrading Arrangement (PTA) can undermine multilateral trade liberalization. Using 211u001ea modified Meade model, it is shown how a PTA shrinks the export sectors in the 211u001eexcluded countries. This in turn leads to an expansion of those countries' import-211u001ecompeting and lobbying sectors. Thus, non-member countries may respond to the 211u001ecreation of a PTA by becoming more protectionist-and thereby undermining efforts 211u001eto liberalize the multilateral trading system.