The Expansion of Preferential Trading Arrangements: Article Review Assignment

Internal Code: MAS331

Article Review Assignment:

The Expansion of Preferential Trading Arrangements: The growing number of preferential trading arrangements (PTAs) since World War II has generated substantial interest in their economic and political effects. It has also prompted interest in the factors that give rise to PTAs, but very little research has been conducted on the growth of extant PTAs. To address this shortcoming, we analyze why some arrangements expand, whereas others do not. We find strong evidence that expansion is most likely when the existing members of a PTA display a high degree of trade openness and when the size distribution of these members is fairly uniform. We also find that PTAs that add new members are likely to do so again in the near future and that, throughout the global system, PTAs tend to expand in clusters. Equally, there is some indication that the market size of a PTA affects its odds of expansion. Finally, we investigate which states join enlarging PTAs. We find that PTAs expand by taking on new members that are economically and politically similar to existing members.Since the conclusion of World War II, there has been tremendous growth in both the number of preferential trading arrangements (PTAs) and the number of countries that are party to them. This development has generated substantial interest in the effects of PTAs on the welfare of states and the stability of the international trading system. It has also prompted interest in the factors that give rise to PTAs. Almost all of the latter research examines why new PTAs form or why states elect to enter such arrangements. Yet, much of the growth of PTAs stems from existing arrangements taking on additional members. Except for the literature addressing the enlargement of the European Union (EU), however, very little research has focused on the growth of extant PTAs. The purpose of this paper is to help fill this gap by analyzing why some PTAs expand, while others do not. The paper proceeds in three parts. Initially, we assess whether any general patterns exist in the formation and expansion of PTAs during the period since World War II.PTAs are institutions that grant each member preferential access to the other participants’ markets and that are designed to foster economic integration among member states. We find that bilateral arrangements (i.e., those comprised of two members that grant each other reciprocal preferences) and “hub and spoke” agreements (i.e., those in which one state or set of states grants unilateral preferences to other members that are not reciprocated) almost never expand. By contrast, over half of the multilateral PTAs (i.e., those comprised of more than two members, all of which grant the other participants reciprocal preferences) formed during this era have taken on additional members after their inception.Second, we analyze the factors influencing which multilateral PTAs expand and when they do so. We find strong evidence that enlargement is most likely when the existing members display a high degree of trade openness and when the size distribution of these members is fairly uniform. We also find that PTAs that add new members are likely to do so again in the near future and that, throughout the global system, PTAs tend to expand in clusters. Equally, there is some indication that the market size of a PTA affects its odds of expansion: economically large arrangements are more likely to grow than smaller ones, although this result is less robust than the others. Finally, we investigate which states join enlarging PTAs. We find that these arrangements tend to expand by adding members that are economically and politically similar to existing participants. Question: To help you to this, please read the article and answer the following questions: 1) What is a PTA 2) Study the “introduction” of the paper a. Identify the purpose of the paper b. Outline the scope/plan of the paper. That is, what are the key sections of the paper? In what order do the writers plan to discuss these? 3) Outline the following patterns of formation/ types of arrangements: a. Partial arrangement b. Hub & Spoke agreement c. FTA d. Customs union e. Economic union 4) Patterns of PTA formation: a. Outline in 1 sentence for each figure, the key findings presented by the authors i. figure 1 ii. figure 2 iii. figure 3 iv. figure 4 5) What are the reasons offered by the authors for the rise in bilateral FTA’s? 6) What is the main reason offered for the decline in bilateral FTA’s? 7) The expansion of PTA’s a. Have Bilateral and Hub & spoke agreements experienced any expansion to membership?Support with examples where provided b. What are the reasons provided for this? 8) Have multilateral PTAS’s experienced expansion? 9) Briefly outline the four factors attributed to the growth/expansion of multilateral PTA’s 10) What is empirical analysis? Why/how have the authors used empirical analysis in their study? NOTE – You don’t have to analyse the empirical evidence here: just a brief understanding of how it is used on the study 11) the effects of institutional characteristics a. what is the difference between deep and shallow arrangements? b. Lust the three indicators of depth c. Is there any evidence relating PTA depth to likelihood of expansion? 12) What is the purpose of ‘robustness checks” NOTE – You don’t have to analyse the information here: just a brief understanding of how it is used on the study 13) Who joins: characteristics of new PTA members a. Do new members have similar or different political and economic systems? b. What is the relationship between size of new and existing members? c. What is the general conclusion made by the authors about new members’ characteristics? d. What are the two reasons for this? 14) Conclusion a. There is a trend of ______________ in PTA’s over the last 60 years b. PTA’s are important to the ____________ poilitica econplmy c. Past studies have failed to focus on why some PTAs ________________ and others do not d. What was the purpose of this paper? 15) Key findings: a. Bilateral and Hub & spoke agreements rarely _______________ b. Multilateral agreements do __________________ c. PTA’s that add new members once are likely to _____________________ d. There is evidence of economic and political _____________________ in expanfinPTAs 16) identify Possibilities for future research a. … b. …. c. …..