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We have used the Michigan computable general equilibrium (CGE) model of World Production and Trade to calculate the aggregate welfare and sectoral employment effects of the menu of U.S.–Japan trade policies. The menu of policies encompasses the various preferential U.S. and Japan bilateral and regional free trade agreements (FTAs) negotiated and in process, unilateral removal of existing trade barriers by the two countries, and global (multilateral) free trade. The U.S. preferential agreements include the FTAs approved by the U.S. Congress with Chile and Singapore in 2003, those signed with Central America, Australia, and Morocco and awaiting Congressional approval in 2004, and prospective FTAs with the Southern African Customs Union (SACU), Thailand, and the Free Trade Area of the Americas (FTAA). The Japanese preferential agreements include the bilateral FTA with Singapore signed in 2002 and prospective FTAs with Chile, Indonesia, Korea, Malaysia, Mexico, Philippines, and Thailand. The welfare impacts of the FTAs on the United States and Japan are shown to be rather small in absolute and relative terms. The sectoral employment effects are also generally small in the United States and Japan, but vary across the individual sectors depending on the patterns of the bilateral liberalization. The welfare effects on the FTA partner countries are mostly positive though generally small, but there are some indications of potentially disruptive employment shifts in some partner countries. There are indications of trade diversion and detrimental welfare effects on nonmember countries for some of the FTAs analyzed. Data limitations precluded analysis of the welfare effects of the different FTA rules of origin and other discriminatory arrangements.

In comparison with the welfare gains from the U.S. and Japan bilateral FTAs, the gains from both unilateral trade liberalization by the United States, Japan, and the FTA partners and global (multilateral) free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system. The U.S. and Japan FTAs are based on “hub” and “spoke” arrangements. We show that the spokes emanate out in different and often overlapping directions, suggesting that the complex of bilateral FTAs may create distortions of the global trading system.

This study investigates the impact of trade integration on payment choice in international transactions using data from Turkey, an emerging economy that signed many trade agreements in the last two decades.

The authors use industry-level trade finance data from Turkey, which reports payment methods in exports at two-digit ISIC level for 180 export destinations. The authors performed linear as well as maximum likelihood techniques to test our hypothesis.

The authors show that the removal of trade barriers by bilateral free trade agreements leads to more exporter-financed transactions. This implies that lowering trade barriers contributes to reducing risk, which leads to more trade finance by exporters.

Trade finance is the lifeblood of global trade. Although the previous literature have analyzed the institutional and financial factors affecting exporters' decision to extend trade credit, the effect of economic integration has been overlooked. In this regard, this study represents the first attempt to analyze the impact of trade integration on trade finance.

The subject‐matter of this article is the recently altered trade policy and practice of Australia and their consistency with the WTO multilateral trading policies and principles. Following its unhappy experience with the power and politics driven trading under GATT, Australia unequivocally supported the legalistic approach of the WTO trading system during the Uruguay Round. Its active participation in the WTO has given it a fair share of global free trade. The rule‐based trading framework of the WTO protects, more often than not, Australia from powerful trading states and blocs using their economic clout to gain unfair terms of trade. Australia has recently opted to pursue its multi‐track trading together with its commitments to WTO multilaterial trade liberalization. Since 2002, it has been negotiating a preferential bilateral free trade agreement with its preferred trading partners. The flurry of such negotiations has resulted in the conclusion of a preferential bilateral free trade agreement with Singapore in 2003. Negotiation towards a similar agreement with the U.S. is ongoing. A preferential trade agreement (PTA) is by nature discriminatory and as such inconsistent with the Most Favoured Nation (MFN) rule under GATT Article I. Despite this apparent contradiction, GATT Article XXIV permits bilateral PTAs as an exception to the MFN rule under certain explicit conditions, which militate against discriminatory, differential and unequal trading deals among WTO members. This article examines the extent to which the existing and potential PTAs of Australia comply with the conditions of GATT Article XXIV. It concludes that these PTAs are not complementary, if not obstructive alternatives, to the WTO multilateral free trading system. They are not in the best long‐term trading interest of Australia either.

The purpose of this paper is to answer the question: does a bilateral free trade agreement (FTA) lead to an improvement in the security of a member country and greater peace between two member countries in the developing world?

This paper reviews existing literature and uses the idea of non‐economic gains from regional trading agreements to explain how Sri Lanka managed to use FTAs to neutralise India and obtain military assistance from Pakistan using its FTAs with two countries during the recently concluded war.

Even though political objectives were not explicitly outlined in Sri Lanka's two FTAs with its big rival neighbours (India and Pakistan), the FTAs helped Sri Lanka to successfully execute the war against the LTTE (the Tamil Tigers) by neutralising India on the one hand and gaining military assistance from Pakistan on the other.

The research approach is basically qualitative. However, there is need to develop a comprehensive theoretical model to capture non‐economics gains from FTAs.

Although there is a growing body of literature on the underlying political and strategic motivations of countries forming regional and bilateral trading arrangements, this paper adds to understanding of what motivates small developing countries to form trade agreements with big neighbours.

The emergence of China in the international trading system has shifted its gravity center, as the country has become one of the mayor actors in international economic relations. Through the subscription of preferential agreements, China is building a network of strategic partnerships worldwide, including Latin America. The purpose of this paper is to answer the questions: Do free trade agreements (FTAs) between China and Latin American countries contribute to expand trade flows and enhance products diversification?

Three countries have an FTA with China, Chile (2005), Peru (2009) and Costa Rica (2010). Through an econometric estimation based on a gravity model, the authors expect to determine the impact of these agreements over both trade flows and products.

The study shows that FTAs have a positive impact on both bilateral trade flows and on the number of exchanged products. Nevertheless, this impact is positive but diminishes in time. The authors confirm that these agreements allowed for a substantive expansion of trade between Latin American economies and China, becoming relevant for policymakers regarding the bi-regional relation.

The study contributes to the understanding of the bilateral trade relations between China and Latin American countries, giving evidence of the magnitude of the impact of FTAs. Through new data, at a six-digit level of detail, this study improves current knowledge regarding bilateral economic relations.

Rules of origin (ROOs) are often cited as major trade barriers even after tariff barriers are removed with the formation of preferential trade agreement (PTA) as shown in a survey result that a large number South Korean firms in the textile industry give up utilizing tariff-free exports to the USA after the bilateral Free Trade Agreement (FTA) due to ROOs. The purpose of this paper is to examine the impact of ROOs on the equilibrium FTA regime and the welfare effects.

The authors determine the impact of ROOs on the equilibrium FTA regime based on an oligopolistic model where there are asymmetry in production technologies of intermediate goods and the capacity of outsourcing intermediate goods.

The authors demonstrate that ROOs are used as a protective trade policy against the FTA member country with an outsourcing option for technologically dominant intermediate goods.

The non-cooperative features of ROOs found in this paper necessitates the introduction of an international coordination mechanism to avoid the prisoners’ dilemma-type implementation of ROOs.

This paper provides a theoretical frame to analyze the protective effects of ROOs under PTAs.

The purpose of this paper is to analyze the potential of partnerships of the European Union (EU) with two of the so‐called BRIC countries, i.e. Brazil and India.

The scope of analysis will be the EU vis‐à‐vis Brazil and India, using two types of trade liberalization: bilateralism/regionalism and multilateralism.

It is found that Brazil and India want to become more important players; yet, they seem to lean against “old” powers (mainly the USA), and tend to focus on south‐south regionalism.

The present study provides a starting‐point for further research on the relationship between the European Union and the new leading powers.

This paper offers practical information to anyone interested in the role of Brazil and India in their relations with the EU, bilaterally/regionally and multilaterally.

The purpose of this article is to provide empirical evidence about the potential positive effects of switching from given non-reciprocal trade preferences granted under the Swiss Generalized System of Preferences (GSP) for developing countries (DCs) to negotiated reciprocal trade preferences under a Free Trade Agreement (FTA).

In a case study of Tunisia’s exports to Switzerland, the authors apply methods of matching econometrics, namely, Propensity-Score Matching and Nearest-Neighbor Matching. Hereby, they are able to identify the average treatment effect on the treated.

Overall preferential exports increased by 125 per cent after the entry into force of the FTA in 2005 until the end of the observation period in 2011. Additionally, an analysis of the agro-food and textile sectors likewise indicate boosting preferential exports in the amount of 100 per cent.

Case studies in this vein have their disadvantages. The greatest disadvantage is the lack of generalization. In contrast to studies estimating the potential effects of an FTA for several countries, the authors are not able to generalize their results based on a single case.

Because trade preferences under the Swiss GSP are offered to the country group of DCs as a whole, non-reciprocal trade preferences are not tailored to the export structure of a particular DC. By switching from non-reciprocal to negotiated reciprocal trade preferences, DCs such as Tunisia expect to negotiate terms which are tailored to their export structure as well as better conditions than competitors from countries which are still beneficiaries of the GSP.

To the authors’ knowledge, this is the first study to investigate explicitly the switch from non-reciprocal to reciprocal trade preferences using econometric matching techniques.

In the above example, India is more productive in both, chemicals as well as ceramics. However, while Bangladesh is thrice as productive domestically in respect to ceramics as compared to chemicals, India is only twice as productive in the same product relative to chemicals. It will be worthwhile for Bangladesh to specialise in the production of ceramics in which it has a comparative advantage and for India to specialise in the production of chemicals. Both countries stand to gain through trade provided that for each unit of chemical Bangladesh imports from India it has to part with less than three units of ceramics to India, while India, too, gains if for each unit of chemical it sells Bangladesh it can get more than two units of ceramics. Thus, when trade takes place, it benefits both parties when the ratio of exchange for each unit of chemicals varies between >2 and <3 units of ceramics. The exact rate of exchange would depend on relative bargaining power of the traders. A value nearer to 3 will indicate larger bargaining power for the Indian exporter, and a value nearer to 2 would indicate greater bargaining power for the Bangladeshi exporter. In general, if the relative gains are higher the lower the elasticity of demand for the product and the greater the value addition to the product. Thus, manufactured products generally fetch better exchange as compared to primary products.