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Political Externalities, Nondiscrimination, and a Multilateral World

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  • Wilfred J. Ethier

Abstract

During the past half century, multilateral trade liberalization has reduced tariffs to historically low levels. The "Received Theory" of multilateral trade agreements, based solely on terms-of-trade externalities between national governments, offers an explanation that has become the conventional wisdom. But it is dramatically inconsistent with actual trade agreements. This paper offers an alternative explanation, based on intergovernmental political externalities, consistent with what we actually observe. With remarkably little necessary formal structure-in particular, no formal bargaining model-this framework (chosen to parallel actual experience) gives an immediate and transparent role to the basic characteristics of contemporary trade agreements: gradual liberalization, reciprocity, nondiscrimination, and multilateralism. Copyright Blackwell Publishing Ltd 2004.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 12 (2004)
Issue (Month): 3 (08)
Pages: 303-320

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Handle: RePEc:bla:reviec:v:12:y:2004:i:3:p:303-320

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Cited by:
  1. Bown, Chad P., 2013. "How different are safeguards from antidumping ? evidence from us trade policies toward steel," Policy Research Working Paper Series 6378, The World Bank.
  2. Wilfred J. Ethier, 2006. "Selling Protection for Sale," PIER Working Paper Archive 06-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Jun 2006.
  3. Wilfred J. Ethier, 2002. "Trade Policies Based on Political Externalities: An Exploration, Third Version," PIER Working Paper Archive 04-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 04 Feb 2004.
  4. Chad Bown & Meredith Crowley, 2003. "Trade deflection and trade depression," Working Paper Series, Federal Reserve Bank of Chicago WP-03-26, Federal Reserve Bank of Chicago.
  5. Wilfred J. Ethier, 2002. "Trade Agreements Based on Political Externalities, Second Version," PIER Working Paper Archive 03-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 30 Nov 2003.
  6. Monika Mrazova, 2009. "Trade negotiations when market access matters," Economics Series Working Papers 447, University of Oxford, Department of Economics.
  7. Wolf-Heimo Grieben & Fuat Sener, 2009. "Labor Unions, Globalization, and Mercantilism," CESifo Working Paper Series 2889, CESifo Group Munich.
  8. Rolf J. Langhammer, 2009. "Unordnung in der Internationalen Handelsordnung. Befunde, Gründe, Auswirkungen und Therapien," Kiel Working Papers 1533, Kiel Institute for the World Economy.
  9. Hideo Konishi & Carsten Kowalczyk & Tomas Sjostrom, 2003. "Free Trade, Customs Unions, and Transfers," Boston College Working Papers in Economics, Boston College Department of Economics 568, Boston College Department of Economics.
  10. Ethier, Wilfred J., 2007. "The theory of trade policy and trade agreements: A critique," European Journal of Political Economy, Elsevier, Elsevier, vol. 23(3), pages 605-623, September.
  11. Antràs, Pol & Staiger, Robert, 2008. "Offshoring and the Role of Trade Agreements," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6966, C.E.P.R. Discussion Papers.
  12. Zhang, Jin & Cui, Zhiwei & Zu, Lei, 2014. "The evolution of free trade networks," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 38(C), pages 72-86.
  13. Wilfred J. Ethier, 2013. "The Trade Agreement Embarrassment, Second Version," PIER Working Paper Archive 13-049, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 02 Sep 2013.
  14. Wilfred J. Ethier, 2003. "TRIPS, externalities, trade agreements, hostages," PIER Working Paper Archive 03-034, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  15. Horn, Henrik & Mavroides, Petros C., 2013. "Multilateral Environmental Agreements in the WTO: Silence Speaks Volumes," Working Paper Series, Research Institute of Industrial Economics 983, Research Institute of Industrial Economics.

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