External trade diversion, exclusion incentives and the nature of preferential trade agreements
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文摘

• A free trade agreement (FTA) is more flexible than a customs union (CU).

• The exclusion incentive of a CU is relatively stronger.

• The formation of either type of PTA causes external trade diversion.

• Such trade diversion induces the non-member to lower its external tariffs.

• While the pursuit of CUs prevents free trade, the pursuit of FTAs does not.

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