The past decade has witnessed a renewed interest in regional trade agreements, with many policymakers and academics seeming to believe that these provide more than the traditional gains from trade. This article examines several possible benefits that regional trade agreements may confer on their partners, including credibility, signaling, bargaining power, insurance, and coordination. It assesses the necessary conditions for each possible channel to work, gives stylized examples of specific types of policy where the benefit might be applicable, examines cases where the explanation might be relevant, and discusses their overall plausibility. It concludes by examining the North American Free Trade Agreement and the Europe Agreements.
ASJC Scopus subject areas
- Economics and Econometrics