Beyond trade creation : preferential trade agreements and trade disputes

Tan LI, Larry D. QIU

Research output: Journal PublicationsJournal Article (refereed)

Abstract

This study investigates the effects of preferential trade agreements (PTA) on bilateral trade disputes. We construct a unique and comprehensive dataset on inter‐country trade disputes from 1995 to 2007. The dataset covers 110 countries and 1,162 bilateral country‐pair trade disputes. Using this dataset in a gravity‐type model of trade dispute analysis, we find that countries belonging to the same PTA tend to experience fewer trade conflicts among themselves than with non‐member countries. By studying various types of PTA with different dispute settlement mechanisms, we further find that the dispute‐reducing effect only comes from PTA with specific provisions on dispute settlement mechanisms. Moreover, the effect is stronger if those PTA explicitly stipulate that members can also resolve their disputes via the WTO Dispute Settlement Body. However, having PTA that do not address how members should resolve their disputes may lead to more dispute initiations than in cases without PTA.
Original languageEnglish
JournalPacific Economic Review
DOIs
Publication statusE-pub ahead of print - 30 Oct 2019

Fingerprint

Trade creation
Preferential trade agreements
Dispute
Dispute settlement
Bilateral trade

Bibliographical note

We benefitted from useful comments and discussions of participants at the HKU‐Nottingham Workshop on International Trade, Brownbag seminar at The University of Hong Kong and Chinese University of Hong Kong, the 9th Australasia Trade Workshop, and a seminar at UIBE (Beijing). We also benefitted from the detailed and constructive suggestions of the referee and editor. We thank Ying Xue for excellent research assistance. Li gratefully acknowledges financial support from the National Natural Science Foundation of China (NSFC: 71703128).

Cite this

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title = "Beyond trade creation : preferential trade agreements and trade disputes",
abstract = "This study investigates the effects of preferential trade agreements (PTA) on bilateral trade disputes. We construct a unique and comprehensive dataset on inter‐country trade disputes from 1995 to 2007. The dataset covers 110 countries and 1,162 bilateral country‐pair trade disputes. Using this dataset in a gravity‐type model of trade dispute analysis, we find that countries belonging to the same PTA tend to experience fewer trade conflicts among themselves than with non‐member countries. By studying various types of PTA with different dispute settlement mechanisms, we further find that the dispute‐reducing effect only comes from PTA with specific provisions on dispute settlement mechanisms. Moreover, the effect is stronger if those PTA explicitly stipulate that members can also resolve their disputes via the WTO Dispute Settlement Body. However, having PTA that do not address how members should resolve their disputes may lead to more dispute initiations than in cases without PTA.",
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Beyond trade creation : preferential trade agreements and trade disputes. / LI, Tan; QIU, Larry D.

In: Pacific Economic Review, 30.10.2019.

Research output: Journal PublicationsJournal Article (refereed)

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AB - This study investigates the effects of preferential trade agreements (PTA) on bilateral trade disputes. We construct a unique and comprehensive dataset on inter‐country trade disputes from 1995 to 2007. The dataset covers 110 countries and 1,162 bilateral country‐pair trade disputes. Using this dataset in a gravity‐type model of trade dispute analysis, we find that countries belonging to the same PTA tend to experience fewer trade conflicts among themselves than with non‐member countries. By studying various types of PTA with different dispute settlement mechanisms, we further find that the dispute‐reducing effect only comes from PTA with specific provisions on dispute settlement mechanisms. Moreover, the effect is stronger if those PTA explicitly stipulate that members can also resolve their disputes via the WTO Dispute Settlement Body. However, having PTA that do not address how members should resolve their disputes may lead to more dispute initiations than in cases without PTA.

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