This paper studies the political viability of free trade agreements (FTAs). The key element of the analysis is the "rent destruction" that these arrangements induce: by eliminating intrabloc trade barriers, an FTA lowers the incentives of import-competing industries to lobby for higher external tariffs, thereby inducing a reduction of the rents created in the lobbying process. Using a conventional competitive model, I show that the prospect of rent destruction can critically undermine (and in some cases rule out entirely) the political viability of welfare-reducing FTAs. This result contrasts sharply with findings from the earlier regionalism literature. Copyright (c) 2005 Massachusetts Institute of Technology.
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Volume (Year): 120 (2005) Issue (Month): 4 (November) Pages: 1475-1506 Download reference. The following formats are available: HTML
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