Bhagwati, Greenaway, and Panagariya (1998) discuss the theoretical aspects of preferential trading, specifically looking at how it relates to the controversy that surrounds regionalism and multilateralism. They look at the significance of the origin of PTAs, or preferential trade agreements, and discuss the factors that have worked to contribute to the development of theories regarding these PTAs. They contend the fact that preferential trading results in trade diversion and on the basis of this, look at how the welfare works to affect these PTAs (Bhagwati, Greenaway, & Panagariya, 1998).
These three individuals look at the static theories of economic theory in regard to preferential trading, starting with Jacob Viner in 1950 and then moving on to the systematic issues that must be raised as a result of the sheer amount of PTAs that are currently in existence (Bhagwati, Greenaway, & Panagariya, 1998). They go on to provide a time path analysis of PTAs, and conclude with information regarding policy debates regarding PTAs at the time the article was written, in the late 1990s (Bhagwati, Greenaway, & Panagariya, 1998).
In the last part of their conclusion they state that those economists who oppose PTAs do have continued reason for concern in regards to this matter, and provides them with a three pronged strategy that they believe is ideal for implementation by those who oppose PTAs, stating that they must first join forces to work to accelerate the reform of PTAs so that they do less harm, continue education regarding PTAs, and push for free trade on a worldwide scale; by doing so, they will be able to work to ensure that PTAs are “rendered void” and as such will no longer be an issue that will be cause for concern in international trade arenas (Bhagwati, Greenaway, & Panagariya, 1998).
- Bhagwati, J., Greenaway, D., & Panagariya, A. (1998). Trading Preferentially: Theory And Policy. Economic Journal, 108(449), 1128-1148.