The Value of Multilateral Trade Liberalization and the Need for Third-Party Sanction
AbstractTrade policies such as tariffs are often featured by the prisoner's dilemma. One country's trade liberalization is vulnerable to the opportunism of another country. This problem is more serious in cases where a country behaving opportunistically can only be punished by the victims. In a trade model with three countries, we show that \circular concessions" are the only way to have any Pareto-improving trade liberalization. The circular nature of the concessions implies that if punishment can be carried out only by the victim of opportunistic behavior, multilateral trade liberalization cannot be sustained. Our results have implications for rule design in multilateral trade systems such as the WTO.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt6kb3q5tn.
Date of creation: 04 Feb 2002
Date of revision:
Contact details of provider:
Postal: 2127 North Hall, Santa Barbara, CA 93106-9210
Phone: (805) 893-3670
Fax: (805) 893-8830
Web page: http://www.escholarship.org/repec/ucsbecon_dwp/
More information through EDIRC
Trade Liberalization; Third-Party Sanction;
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.:
- Bhagwati, Jagdish & Panagariya, Arvind, 1996. "The Theory of Preferential Trade Agreements: Historical Evolution and Current Trends," American Economic Review, American Economic Association, vol. 86(2), pages 82-87, May.
- Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).
If references are entirely missing, you can add them using this form.