The Good News on Free Trade Agreements

Over the past quarter century, the world has witnessed an unprecedented wave of globalisation efforts that have often taken the form of regional trade and deeper integration agreements. These include some of the largest mega trade deals that have been recently negotiated, such as the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP). Many policymakers and academics alike have expressed high hopes that such agreements will not only liberalise trade but also promote growth and investment. At the same time, some popular observers are alarmed that the intense integration in certain regions may hurt non-member countries and lead to increased inequality and lower efficiency on a global scale. Despite great expectations, some fears as well as persistent interest in the topic, there is little sound evidence regarding the structural relationships between trade (liberalisation), growth and investment. In a series of papers, CESifo visiting researcher Yoto V. Yotov, together with James E. Anderson (Boston College) and Mario Larch (University of Bayreuth and CESifo), have developed dynamic multi-country general equilibrium models that characterise, identify and quantify the relationships between trade, growth and foreign direct investment. The dynamic effects for the liberalising countries are strong and persistent, while the effects on non-members are relatively small, short-lived and, in some cases, even positive (due to spillovers).

Mr Yotov's research interests are in the area of international trade, specifically, international trade policy, international trade costs, political economy of trade policy as well as the trade policy impact on growth and labour market outcomes. Most recently, he has focused on the measurement and implications of intra-national trade costs and on the development of structural estimation frameworks that can be used to quantify the dynamic effects of trade policy. Research in progress includes "Intra-national Trade Costs", "Trade Liberalisation, Growth, and FDI: A Structural Estimation Framework" and "Trade Liberalisation and Income Inequality".

Yoto Yotov is Associate Professor of Economics at the School of Economics of Drexel University, Philadelphia. He is also an Associated Research Fellow at the Economics Research Institute of the Bulgarian Academy of Sciences. He holds a PhD and an MS in Economics from Boston College, a BA/BS in Economics from Truman State University and a BA in International Economic Relations from the D. A. Tsenov Academy of Economics in Bulgaria. Mr Yotov's publications have appeared in the American Economic Review, the International Economic Review, the Journal of International Economics and the European Economic Review, among others. His research has been supported by the World Bank, various units of the Canadian Government, Oxford University's Centre for Corporate Reputation and the International Growth Centre of the London School of Economics, among others.