The Clash of Liberalizations: Preferential Trade Agreements as a Stumbling Block to Multilateral Liberalization

All great economists produce seminal contributions and provide their students and colleagues with brilliant insights; Jagdish Bhagwati has certainly done so. But he has done much more. Through his wit and energy he has communicated those insights to the public and wielded our best science to improve trade policy making. In this note we address the question in which his unique blend of academic and policy work has been most valuable in the last 15 years: whether preferential trade agreements (PTAs) are a stumbling block to multilateral trade liberalization (MTL). Given that all WTO members except Mongolia are now members of a PTA and yet most are also nonmembers of most PTAs this question has arguably become the most important one in trade policy. Bhagwati first launched the warning in 1991 and challenged trade economists to tackle it. His work has inspired a voluminous theoretical literature as well as recent evidence that suggests there is indeed a clash between preferential and multilateral liberalization