Do trade agreements really increase
The short answer is “yes” on average – but not
all trade agreements do so to the same extent
(see e.g. Baier/Bergstrand 2007, Baier et.al
2007 and Kohl 2014).
One explanation for varying impact is the
heterogeneity of agreements for example in
terms of design, institutional quality etc.
Different characteristics of accords can also
affect the credibility of commitments.
Handley and Limao (2015) find that credible
preferential trade agreements can increase
trade even if applied barriers are already low
and that agreements can play an important
role in removing uncertainty about future trade
policies which in turn spurs export investment.