How preferential are preferential trade agreements?: analysis of product exclusions in PTAs

Many studies on preferential trade agreements (PTAs) tend to consider a trade agreement as a binary choice: either a particular country chooses to establish a PTA with its partners or it does not. However, free trade agreements are not alike. The value of preferences in PTAs can vary tremendously and may even be different towards different partners, which is embodied in the list of product exclusions of a PTA. A detailed examination of product exclusions sheds a light on the value of preferences in PTAs. This study examines the pattern of product exclusion in several PTAs and explores relevant factors influencing the decision to include or exclude a particular product. The econometric estimation in this study indicates that product exclusions in PTAs are partly the outcome of a bargaining process conducted by negotiating countries, but at the same time the trade policy of the reporting countries heavily influences the decision to exclude a particular product.