# **1. Introduction**

The number of Preferential Trade Agreements (PTAs) has increased dramatically in the last quarter century.<sup>2</sup> While 50 trade agreements were in force and notified to the WTO in 1990, the number increased to 279 by the end of 2015. This dramatic change has spurred a large debate among researchers and policy makers on the rationale for preferential arrangements, their impact on trade flows, growth and welfare of member and non‐member countries, as well as their relationship with the broader system of global trade governance. Many questions have emerged, including the following: Do PTAs allow members to commit their trade policy and internalize cross‐border policy spillovers? Do they create more than divert trade? Do they serve as building blocks or stumbling blocks of the multilateral trading system? A large body of literature has been devoted to investigate these and other issues.<sup>3</sup> An often overlooked factor in this debate is that, alongside their increasing number, the content of PTAs has changed over time. While before the 1990s trade arrangements mostly focused on tariff reductions, more recent PTAs include a set of provisions covering policy areas that go well beyond this. Specifically, a number of recent studies (e.g. Horn, Mavroidis and Sapir, 2010; WTO, 2011) document how many trade agreements cover regulatory issues, such as services, intellectual property rights protection, investment, and competition policy, among others. Thus, abstracting from the expanding coverage of trade agreements will lead to inaccurate and/or incomplete answers to the questions posed above on the rationale and effects of trade agreements. In particular, the lack of systematic information on the content of PTAs limits the possibility of addressing those questions with the proper tools of economics.

The primary purpose of this study is to analyze in detail the content of PTAs as an essential step to inform the debate on their rationale and impact. Building on the methodology developed by Horn, Mavroidis and Sapir (2010), we collected information for all PTAs in force and notified to the WTO in 2015. Specifically, the database contains information on the inclusion of 52 policy areas and their legal enforceability in 279 PTAs among 189 countries.<sup>4</sup> To our knowledge, this database offers the most comprehensive data available in terms of the number of trade agreements, countries and policy areas covered.<sup>5</sup> Some novel stylized facts emerge from the analysis of the new data on PTAs. First, the new database can inform on the changing content of PTAs. In addition to tariff reductions, more than half of the PTAs in the database include legally enforceable regulations in some policy areas that fall under the current mandate of WTO. These provisions (referred to as “WTO plus” or “WTO+” in the literature) include areas such as customs regulations, export taxes, anti‐dumping, countervailing measures, technical barriers to trade (TBT), or sanitary and phytosanitary standards (SPS), among others. Provisions outside the WTO mandate (usually called “WTO extra” or “WTO‐X”) include a wide‐ranging set of policy areas from investment to

> 2 Note that the term PTAs will be used throughout the paper and is preferred to the term ‘regional trade agreements (RTAs)’ since some of these agreements are not necessarily between countries within the same region or in regional proximity. 3 Recent surveys include Freund and Ornelas (2010), WTO (2011), and Limao (2016).

> 4 The full list of provisions and trade agreements are reported in Tables 1 and Appendix Table 3 and discussed in detail in Section ‐ 2. The database is freely available on the World Bank website. The data can be accessed at: http://data.worldbank.org/data <u>catalog/deep‐trade‐agreements.</u>

> 5 There are two main limitations in terms of coverage. First, we have no information on trade agreements no longer in force. Second, PTAs that are not notified to the WTO are not included here. We come back to this and other issues for future research in the Conclusion.

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