Third-Country Effects On The Formation Of Free Trade Agreements

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The economic literature has generally studied the formation of free trade agreements based on the economic characteristics of the participating countries. In this article, we show, both theoretically and empirically, that the choice of a free trade agreement also depends decisively on existing free trade agreements with third countries. Taking into account the interdependence of free trade agreements helps to explain an important part of free trade agreements that would otherwise not be predicted by the economic characteristics of countries. Friend, C., 2000. Different paths to free trade: the benefits of regionalism. Quarterly Economic Bulletin 115 (4), 1317-1341. Furusawa, T., Konishi H., 2007. Journal of International Economics 72 (2), 310-335. Bond, E., Syropoulos, C., 1996. The size of trading blocs: market power and global well-being effects.

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