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Political Externalities, Nondiscrimination, and a Multilateral World

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Author Info
Wilfred J. Ethier

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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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File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9396.2004.00451.x
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Publisher Info
Article provided by Blackwell Publishing 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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  1. Wilfred J. Ethier, 2002. "The Theory of Trade Policy and Trade Agreements: A Critique," PIER Working Paper Archive 06-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 05 Jun 2006. [Downloadable!]
    Other versions:
  2. Hideo Konishi & Carsten Kowalczyk & Tomas Sjostrom, 2003. "Free Trade, Customs Unions, and Transfers," Boston College Working Papers in Economics 568, Boston College Department of Economics. [Downloadable!]
  3. Pol Antràs & Robert W. Staiger, 2008. "Offshoring and the Role of Trade Agreements," NBER Working Papers 14285, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Chad Bown & Meredith Crowley, 2003. "Trade deflection and trade depression," Working Paper Series WP-03-26, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  5. Monika Mrazova, 2009. "Trade negotiations when market access matters," Economics Series Working Papers 447, University of Oxford, Department of Economics. [Downloadable!]
  6. 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. [Downloadable!]
  7. Chad P. Bown, 2004. ""How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel"," Econometric Society 2004 North American Summer Meetings 434, Econometric Society. [Downloadable!]
  8. 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. [Downloadable!]
  9. 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. [Downloadable!]
  10. 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. [Downloadable!]
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