Multilateral and Bilateral Trade Agreements
There are several ways a trade agreement can be structured. Bilateral trade agreements are between two countries, while multilateral trade agreements may involve countries. Read this section. Can you think of situations that could lead countries to prefer one type of agreement over another?
Over the last decades, bilateral trade agreements (BTAs) have increased considerably in number and economic relevance. Notably, such agreements substantially affect global trade, since the reorganization of flows of goods and services has prominent impacts
on the contracting countries' economies, but also on other parties that are (directly or indirectly) engaged in trade with these countries. Here, we empirically study the effect of BTAs on the input-output linkages between the contractual parties'
national economic sectors by defining a new measure of Trade Interconnectedness (TI), which describes the relative importance of direct and indirect production linkages between the two countries in the international trade network. By analyzing its
time evolution for each pair of trade agreement partners, we demonstrate that while most BTAs are succeeded by an increase in TI between the contractors, there are some notable exceptions. In particular, comparing the trade profiles of China and the
United States (US), we find indications that both countries have been pursuing fundamentally different objectives and strategies related to the negotiation of BTAs.
Source: Julian Maluck, Nicole Glanemann, and Reik V. Donner, https://www.frontiersin.org/articles/10.3389/fphy.2018.00134/full
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