Preferential Trade Agreement Networks: Proliferation and Impact
In recent years, there has been a proliferation of preferential trade agreements (PTAs). Through these treaties, countries agree to reduce trade barriers and open their economies to one another. Besides facilitating cooperation between member countries, PTAs also create exclusions that may harm non-members. The scholarship on trade agreements has focused on two questions: (1) when do countries join PTAs? and (2) how do PTAs impact trade cooperation? There is little consensus on answers due, at least in part, to methodological obstacles. The indirect effects of PTAs---on non-member countries---are important parts of the puzzle of whether they increase trade cooperation. Using network analysis, this paper shows that PTAs proliferate especially between small countries and active trade partners. The apparent impact of these treaties on trade is positive, once sufficient time-spans are included. By explicitly modeling indirect effects in a network, this paper reduces measurement bias and generates more accurate estimates.