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Is the GATT/WTO's Article XXIV bad?

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  • Mrázová, Monika
  • Vines, David
  • Zissimos, Ben

Abstract

The GATT/WTO Article XXIV prevents a customs union (CU) from raising its common external tariff. In this paper, we compare CU formation with and without this Article XXIV constraint. We show, in a multi-country oligopoly model, that for a given CU structure, Article XXIV improves world welfare by lowering trade barriers. However, we also show that Article XXIV has a composition effect on CU formation: it affects the endogenous choice of CUs. By encouraging more symmetric CUs, Article XXIV causes more trade to be subject to trade barriers. As a result, Article XXIV may be ‘bad’ for world welfare.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 89 (2013)
Issue (Month): 1 ()
Pages: 216-232

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Handle: RePEc:eee:inecon:v:89:y:2013:i:1:p:216-232

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: Coalition formation game; Customs union; Protection; Trade block; Trade liberalization;

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Cited by:
  1. Jorzik, Nathalie & Mueller-Langer, Frank, 2013. "Multilateral Stability and Efficiency of Trade Agreements: A Network Formation Approach," Discussion Papers in Economics 14587, University of Munich, Department of Economics.
  2. Facchini, Giovanni & Silva, Peri & Willmann, Gerald, 2013. "The customs union issue: Why do we observe so few of them?," Journal of International Economics, Elsevier, vol. 90(1), pages 136-147.
  3. Xuepeng Liu & Emanuel Ornelas, 2014. "Free Trade Agreements and the Consolidation of Democracy," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 29-70, April.

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