Preferential trading arrangements and excluded countries: Ex-post estimates of the effects on prices

Preferential Trade Agreements (PTAs) have become pervasive in recent years, not least through the expansion of the European Union and agreements in the Americas. They clearly have implications for the countries they exclude, but ex-post empirical studies of these effects are very rare. This paper sketches some recent results. This paper considers two aspects of the 'excluded countries' story. First, it briefly reviews the well-known but frequently ignored analysis of the relationship between the loss of exports and a country's economic welfare. Second, it presents some evidence on the adverse effects of PTAs on non-members' terms of trade. Despite being central to the theoretical literature, the terms-of-trade effects of PTAs have been almost entirely neglected by empirical economists. Indeed, expost studies that focus at all on the terms-of-trade effects of commercial policy are few.