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Exchanging market access at the outsiders' expense: the case of customs unions

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  • Emanuel Ornelas

Abstract

Under a customs union, countries can exchange preferential market access by coordinating external tariffs to shift profits from excluded countries. I show that the exporting rents resulting from this coordination can offset trade diversion losses produced by the union, even if its members are relatively small in world markets. Such gains come, however, at the expense of excluded countries. I show that small countries can use customs unions also to foster multilateral cooperation, by increasing the incentives of excluded countries to support global free trade.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 40 (2007)
Issue (Month): 1 (February)
Pages: 207-224

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Handle: RePEc:cje:issued:v:40:y:2007:i:1:p:207-224

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Cited by:
  1. Rafael Lima & Humberto Moreira & Thierry Verdier, 2008. "Lobbying and Information Transmission in Customs Unions," Working Papers 09_01, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
  2. Giovanni Facchini & Peri Silva & Gerald Willmann, 2008. "The Customs Union issue: Why do we observe so few of them?," Center for Economic Studies - Discussion papers ces0827, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  3. Elie Appelbaum & Mark Melatos, 2012. "Camouflaged Trade Agreements," Working Papers 2012_2, York University, Department of Economics.
  4. Ornelas, Emanuel, 2012. "Preferential Trade Agreements and the Labor Market," CEPR Discussion Papers 8805, C.E.P.R. Discussion Papers.
  5. Lahiri Sajal & Peri Silva, 2013. "Potential Pareto-improving Move towards Most Favored Nation Tariffs," Development Working Papers 348, Centro Studi Luca d\'Agliano, University of Milano, revised 24 Apr 2013.

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