ABSTRACT
Although mainstream international trade theorists have traditionally preferred non-discriminatory multilateralism to preferential trade arrangements (PTAs), they have recently developed more favorable views toward the proliferation of bilateralism and regionalism. If we focus on a simple static theoretical model of liberalizing trade in goods, the welfare effect of multilateral trade liberalization almost always trumps partial trade liberalization from PTAs. Furthermore, the discriminatory nature of bilateral or regional trade liberalization undermines the non-discrimination principle. However, despite such risks, PTAs, particularly bilateral free trade agreements (FTAs), have been doing surprisingly well since the latter half of the 1990s.
