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Multilateral Tariff Cooperation during the Formation of Free Trade Areas

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  • Bagwell, Kyle
  • Staiger, Robert W

Abstract

The authors consider the impact of the formation of free-trade agreements on multilateral tariff cooperation. They assume that countries are limited to self-enforcing multilateral arrangements that balance the gains from deviating against the costs of an ensuing trade war. The authors find that the emergence of free-trade areas will be accompanied by a temporary retreat from liberal multilateral trade policies, as the initial balance supporting multilateral cooperation is upset. Eventually, however, as the full impact of the emerging free-trade agreement on multilateral trade patterns is felt, this initial balance tends to reemerge and liberal multilateral trade policies can be restored. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 38 (1997)
Issue (Month): 2 (May)
Pages: 291-319

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Handle: RePEc:ier:iecrev:v:38:y:1997:i:2:p:291-319

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References

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  1. Riezman, Raymond, 1985. "Customs unions and the core," Journal of International Economics, Elsevier, vol. 19(3-4), pages 355-365, November.
  2. Rodney D. Ludema, 1998. "On the Value of Preferential Trade Agreements in Multilateral Negotiations," International Trade 9802003, EconWPA.
  3. Bond, E.W. & Syropoulos, C., 1993. "Optimality and Stability of Regional Trading Blocs," Discussion Papers 93-11, Department of Economics, University of Birmingham.
  4. Kyle Bagwell & Robert W. Staiger, 1988. "A Theory of Managed Trade," NBER Working Papers 2756, National Bureau of Economic Research, Inc.
  5. Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc.
  6. Kyle Bagwell & Robert W. Staiger, 1993. "Miltilateral Tariff Cooperation During the Formation of Customs Unions," Discussion Papers 1070, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Paul Krugman, 1991. "The move toward free trade zones," Economic Review, Federal Reserve Bank of Kansas City, issue Nov, pages 5-25.
  8. Kowalczyk, Carsten & Sjostrom, Tomas, 1994. "Bringing GATT into the Core," Economica, London School of Economics and Political Science, vol. 61(243), pages 301-17, August.
  9. 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.
  10. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
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