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Post-Doha Trade Policy Options for a Small Country

Author

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  • Alan V. Deardorff

    (The author is at the Ford School of Public Policy, University of Michigan, Ann Arbor, MI48109-3091. He can be contacted at +1 734 764 6817; email: alandear@umich.edu; http://www-personal.umich.edu/~alandear/)

Abstract

This paper uses a partial equilibrium model of two small countries, within a large world economy, implementing reciprocal tariff cuts on each other’s exports in a regional trade agreement (RTA) and compares the effects with unilateral most favoured nation (MFN) tariff cuts. The reciprocal cuts are shown to be more likely beneficial to a country if the partner country’s trade is larger. The welfare effects of a country’s own tariff cut on imports are also compared to the effects on its welfare of the partner country’s tariff cut on its exports. If tariff levels are low, the latter is seen to be larger than the former. Implications of the analysis are that, if multilateral trade liberalisation is unlikely, then small countries should seek to form RTAs with countries larger than themselves. In addition, to assure that they have something to offer in such arrangements, they should not go too far in unilaterally reducing their MFN tariffs.

Suggested Citation

  • Alan V. Deardorff, 2011. "Post-Doha Trade Policy Options for a Small Country," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(1), pages 117-138, February.
    • Handle: RePEc:sae:mareco:v:5:y:2011:i:1:p:117-138
    DOI: 10.1177/097380101000500107
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    Keywords

    Regional Trade Agreements; Free Trade Agreements; JEL Classification: F13 Commercial Policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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