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Journal of Economic Integration 2010 June;25(2) :276-297.
DOI: https://doi.org/10.11130/jei.2010.25.2.276
Are Trade Blocs Building or Stumbling Blocs?
Richard E. Baldwin and 
Elena Seghezza 
Graduate Institute of International Studies
University of Genoa
Copyright ©2010 Journal of Economic Integration
ABSTRACT

The stumbling-bloc argument asserts that regionalism hinders MFN tariff cutting. If this was of first-order importance over previous decades, we should detect this in the levels of the tariffs. Using tariff line data for 23 large trading nations we find that MFN and PTA tariffs are complements, not substitutes since margins of preferences tend to be low or zero for products where nations apply high MFN tariffs. One interpretation is that regionalism is neither a building nor a stumbling bloc. Sectoral vested interests are a ‘third factor’ that generates the positive correlation between MFN and PTA tariff levels.

JEL Classification: F13, F15

Keywords: Regionalism | Multilateralism | Stumbling Blocs | Trade Blocs
 
REFERENCE
1. Baldwin, R. E. (1987), "Politically Realistic Objective Functions and Trade Policy: PROFs and Tariffs", Economic Letters, Vol. 24, pp. 287-90.
2. Bhagwati, J. (2008), Termites in the Trading System: How Preferential Agreements Undermine Free Trade, Oxford University Press, Oxford.
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