Trade Agreements and Economic Growth

This article studies the growth effects of regional trade agreements (RTAs), taking into account the World Trade Organization (WTO) participation of RTA members. Assuming smaller preference margins of RTAs for WTO members than for nonmembers, I show in a model a stronger growth effect of RTAs for non-WTO members than the effect for WTO members. Based on a comprehensive set of 270 RTAs and a large panel data set over the period of 1960–2007, the regression results show that RTAs promote growth for non-WTO members, while their growth effect is weaker and often insignificantly different from zero for WTO members. This implies that, so far, the complementarity between the two approaches of trade liberalization in promoting economic growth is limited.