A Political Economy Analysis of Preferential Trading and Multilateralism
AbstractThis paper examines the impact of Free Trade Areas (FTAs) on the incentives for multilateral liberalization and challenges the contention that Free Trade Areas are superior to GATT style (multilateral) trade liberalization as a way of getting to multilateral free trade for all. Incorporating political economy factors in a model of trade with imperfect competition in segmented markets, this paper reaches two conclusions: First, that preferential arrangements which divert trade away from the rest of the world are more likely to be supported politically, and second, that such preferential arrangements will reduce member country incentives for multilateral liberalization. It is also argued that in some cases this reduction in incentives could be critical: Multilateral liberalization that is initially feasible could be rendered infeasible by preferential arrangements. The larger the trade diversion resulting from the preferential arrangement, the more likely this will be the case.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 22 (1996)
Issue (Month): 4 (Fall)
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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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More information through EDIRC
Free Trade; Trade;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
- Richard Baldwin, 1993.
"A Domino Theory of Regionalism,"
NBER Working Papers
4465, National Bureau of Economic Research, Inc.
- Kimakova, Alena & Rajabiun, Reza, 1999. "An Applied General Equilibrium Analysis of EU Integration for Hungary and Slovakia," Transition Economics Series 9, Institute for Advanced Studies.
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