Regional trade agreements are multiplying and changing their nature. In 1990, 50 trade agreements were in force. In 2017, there were more than 280. In many trade agreements, negotiations today go beyond tariffs and cover several policy areas relating to trade and investment in goods and services, including rules that go beyond borders, such as competition policy, public procurement rules and intellectual property rights. ATRs, which cover tariffs and other border measures, are “flat” agreements; THE RTAs, which cover more policy areas at the border and at the back of the border, are “deep” agreements. Free trade agreements are treaties that regulate the tariffs, taxes and tariffs that countries collect for their imports and exports. The most well-known regional trade agreement in the United States is the North American Free Trade Agreement. Using the term `regional`, it should be remembered that trade agreements are international – member states of a trade pact do not need to be nearby. As a result, regional trade agreements can cover large geographic areas. The main criticism of free trade agreements is that they are responsible for outsourcing employment. There are seven overall drawbacks: regional trade agreements vary according to the state of engagement and the agreement between the Member States. Full integration of Member States is the last level of trade agreements.
In collaboration with partners such as the WTO and the OECD, the World Bank Group provides information and support to countries wishing to sign or deepen regional trade agreements. In practical terms, the work of the WBG understands that the preferential trade agreement requires the lowest level of commitment to removing trade barriers Trade barriers are legal measures taken primarily to protect a country`s national economy. They generally reduce the amount of goods and services that can be imported. These barriers are put in place in the form of tariffs or taxes and, although Member States do not remove barriers between them. There are also no common trade barriers in preferential trade zones. A better solution than protectionism is to include rules in trade agreements that protect against inconvenience. The effects of regional trade agreements (ATRs) on countries׳ welfare are controversial. In this article, we evaluate these effects using stock market returns from an up-to-date dataset that spans 200 RTA ads, 80 savings and 20 years. We measure the impact of news on ATRs on domestic stock market returns after adjusting these returns for international stock market movements. We then link these unusual returnees to the characteristics of the RTA members and to the agreements themselves. We find strong evidence of the natural trading partner hypothesis; Stock markets rise more strongly when RTAs are signed between countries that already have high trading volumes.
Stock markets also rise more strongly when the poorest countries sign RTRs and when RTAs are signed with smaller partners.