We develop a new framework to study the welfare consequences of preferential trade agreements (PTAs) under global sourcing, incomplete contracts and endogenous matching. uncover several channels through which PTAs affect welfare. Some effects stem from intensive margin changes—i.e., changes in investment production existing vertical chains—and extensive relocations—i.e., due formation destructi...

Abstract Almost all participants in free trade agreements (FTAs) exclude at least a few products or sectors from complete tariff removal on the exports of their FTA partners. The positive tariffs that remain within an are often highest countries apply MFN basis. It seems plausible such exclusions may be chosen because domestic producers these viewed as especially vulnerable to competition impor...

Preferential trade agreements (PTAs) have become an increasingly prominent feature of the international trade environment, with salient examples being the widening and deepening of the European Union (EU), the success of the Mercosur, and the formation of the North American Free Trade Association (NAFTA). In fact, a majority of the active agreements notified to gatt through 1995 were signed in ...