TY  - JOUR
AU  - Dee, Philippa
AU  - Gali, Jyothi
TI  - The Trade and Investment Effects of Preferential Trading Arrangements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10160
PY  - 2003
Y2  - December 2003
DO  - 10.3386/w10160
UR  - http://www.nber.org/papers/w10160
L1  - http://www.nber.org/papers/w10160.pdf
N1  - Author contact info:
Philippa Dee
Asia Pacific School of Economics and Government
Crawford Building
Canberra ACT 0200
Australia
Tel: 61 2 6125 8598
Fax: 61 2 6125 0767
E-Mail: Philippa.Dee@anu.edu.au

Jyothi Gali
Productivity Commission
POB 80
Belconnen ACT 2616, AUSTRALIA
E-Mail: j.gali@acilallen.com.au
M1  - published as Philippa Dee, Jyothi Gali. "The Trade and Investment Effects of Preferential Trading Arrangements," in Takatoshi Ito and Andrew K. Rose, editors, "International Trade in East Asia" University of Chicago Press (2005)

AB  - This study quantifies the impact of traditional and  new age' provisions of preferential trading arrangements (PTAs) on merchandise trade and investment.  It does so by estimating gravity models of bilateral trade and investment.  It finds that recent and some past PTAs are not as benign as some contemporary empirical assessments have suggested.  A careful consideration of the analytical issues   including controlling comprehensively for other observable and unobservable factors, and testing explicitly for whether the trade and investment effects are significantly different after PTA formation than before   accounts for less favourable finding in this study.  It is also possible for PTAs to have adverse effects on investment flows.  If investment responds in  beachhead' fashion to the trade provisions of PTAs, the trade carried out from those beachheads could constitute traditional trade diversion.  However, the paper finds little evidence of beachhead investment.  Instead, it finds evidence of net investment creation in response to the  new age', non-trade provisions of PTAs.  Thus the finding on investment is more positive than for trade, but not without qualifications, since trade diversion is still possible from the new investment positions.
ER  -