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Preferential Trading Arrangements as Strategic Positioning

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Author Info
Daniel Seidmann () (University of Nottingham)
Abstract

We analyze a three-country model of trade negotiations in which countries can form bilateral free trade areas, customs unions or a trilateral preferential trading arrangement, and can continue negotiating after reaching an agreement. In contrast to the literature on multilateral bargaining, the set of agreements can form a (nonpartitional) network; while in contrast to the network literature, players can reach multilateral agreements. We show that patient enough countries reach bilateral arrangements if and only if insiders gain more than outsiders; and we characterize conditions under which a hub and spoke pattern emerges. We also use variants on the model to explain why a US commitment not to bargain bilaterally sustained progress at GATT negotiations; and the rarity of open access preferential trading arrangements.

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Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2006-09.

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Date of creation: Apr 2006
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Handle: RePEc:cdx:dpaper:2006-09

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  2. Chatterjee, Kalyan & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Blackwell Publishing, vol. 60(2), pages 463-77, April. [Downloadable!] (restricted)
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  4. Baldwin, Richard, 1997. "The Causes of Regionalism," CEPR Discussion Papers 1599, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Kindleberger, Charles P, 1986. "International Public Good without International Government," American Economic Review, American Economic Association, vol. 76(1), pages 1-13, March.
  6. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August. [Downloadable!] (restricted)
  7. Bond, Eric W. & Riezman, Raymond G. & Syropoulos, Constantinos, 2004. "A strategic and welfare theoretic analysis of free trade areas," Journal of International Economics, Elsevier, vol. 64(1), pages 1-27, October. [Downloadable!] (restricted)
  8. Kyle Bagwell & Robert W. Staiger, 1999. "Multilateral Trade Negotiations, Bilateral Opportunism and the Rules of GATT," NBER Working Papers 7071, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. C. Fred Bergsten, 1997. "Open Regionalism," The World Economy, Blackwell Publishing, vol. 20(5), pages 545-565, 08. [Downloadable!] (restricted)
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  18. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October. [Downloadable!] (restricted)
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  19. Philippe Aghion & Pol Antràs & Elhanan Helpman, 2004. "Negotiating Free Trade," NBER Working Papers 10721, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. 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. [Downloadable!] (restricted)
  21. Bond, Eric W & Park, Jee-Hyeong, 2002. "Gradualism in Trade Agreements with Asymmetric Countries," Review of Economic Studies, Blackwell Publishing, vol. 69(2), pages 379-406, April.
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(explanations, 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.)

  1. Mrazova, Monika & Vines, David & Zissimos, Ben, 2009. "Is the WTO's Article XXIV Bad?," CEPR Discussion Papers 7144, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Eric Bond, 2009. "Paths of efficient self-enforcing trade agreements," Economic Theory, Springer, vol. 41(1), pages 85-104, October. [Downloadable!] (restricted)
  3. Ben Zissimos, 2007. "Why are Trade Agreements Regional?," Working Papers 2007.67, Fondazione Eni Enrico Mattei. [Downloadable!]
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