Faculty of Economics and Business Administration Publications Database

Are Free Trade Agreements contagious?

Baldwin, Richard
Volume: 88
Number: 1
Pages: 1 - 16
Month: September
ISSN-Print: 0022-1996
Link External Source: Online Version
Year: 2012
Keywords: Contagion index, Free Trade Agreements, International trade, Regionalism, Domino theory of regionalism
Abstract: This paper tests the hypothesis that the domino-like spread of regionalism is partly driven by ‘defensive’ FTAs, i.e. FTAs signed to reduce discrimination created by third-nation FTAs. A theory-based measure is used to test contagion against alternative determinants of regionalism. The main finding is that contagion is present in our data and robust to various econometric specifications, samples, and inclusions of various economic and political controls including the Baier–Bergstrand controls. Some support is found for political theories that stress ‘political distance’ but none for those that stress ‘slow multilateralism’.