We study, theoretically and empirically, how countries choose intra-bloc tariffs and preferential margins when they form Preferential Trade Agreements (PTAs). Our model indicates that countries should set systematically lower preferential margins when the bloc takes the form of a free trade area...

Price data on exports to Brazil from countries excluded from MERCOSUR show that preferential trading agreements hurt nonmember countries by compelling them to reduce their prices to meet competition from suppliers within the regional trading bloc.The welfare effects of preferential trading...