Almost every country in the world is a member of at least one preferential trade agreement (PTA). These agreements govern more than half of all world trade. Identifying the effects of PTAs on trade is challenging due to self-selection bias: countries choose to become members. To address the selection issue, this paper builds a comprehensive dataset, and uses the blocking estimator from the causal inference framework. The paper shows that, after accounting for selection, PTAs increase bilateral trade by 48% fifteen years after entry into force. The effects phase in gradually, with one-third being realized five years prior to the agreement. Anticipation effects are only present for non-natural trading partners—geographically distant countries that trade little and have a low probability of signing an agreement. Other methods that do not account for selection substantially overestimate the effects. Equipped with the empirical estimates, this paper builds a model to analyze the general equilibrium effects of a recent important agreement.
This paper takes a long-run perspective and analyzes the evolution of trade agreements from the `first wave of globalization'—the beginning of the 19th century—to modern times. I collect a novel dataset containing information about trade agreements dating back to 1815. I present the information from the texts of the treaties in two different ways. First, by reading the treaty texts, I identify and codify the key design features that were agreed upon by the signatories. Second, I analyze the evolution of the design of the commercial treaties, the emergence and the prevalence of the key features in different time periods, and the geographical distribution of the treaties. The results show that many of the features of the contemporary trading system were developed long before the General Agreement on Tariffs and Trade (GATT)—the foundation of the modern trading system—was signed. Moreover, it emerges from the analysis that many of the commercial provisions in the treaties appeared, adjusted and developed along with the political and economic developments of the different historical periods.