Speaker: Alessandro Nicita, UNCTAD
Abstract: One of the consequences of the proliferation of preferential trade agreements is that an increasing share of international trade is not subject to the most favored nation tariff, but enters
markets through preferential access. Preferential access affects trade because, by providing some countries with a relative advantage, it is essentially a discriminatory practice. This paper examines the extent to which preferential access affects bilateral trade flows. The empirical approach consists first in providing two indices: one summarizing direct market access conditions (the overall tariff faced by exports) and one measuring relative market access conditions (the overall tariff faced by exports relative to that faced by competitors). Then, the indices are used in a gravity model in order to estimate how changes in market access conditions affect international trade. Although direct market access conditions are generally more important, the results indicate that relative advantage provided by the structure of preferences also affects the magnitude of bilateral trade flows. That is, bilateral trade flows depend upon the advantage provided by the system of preferences vis-à-vis other competitors.