Regional Integration and Lobbying for Tariffs Against Non-members
AbstractUsing an extension of the influence-driven lobbying approach developed by Grossman and Helpman, we study the impact of regional integration arrangements (RIAs) on trade policy towards non-members in a three-good, three-country model. We explore under what conditions the formation of an RIA between countries A and B leads, through lobbying pressure, to a higher or lower tariff against country C. Comparing free trade areas (FTAs) with and without rules of origin and customs unions (CUs) with varying degrees of economic and political integration, we show how increasingly deep integration, both within an FTA and a CU, can lead to rising protection against non-member imports. These results, which abstract from two differences between FTAs and CUs, namely the extent of free-riding in CUs and the component of a CU’s tariffs designed to improve the members’ terms of trade, need to be qualified accordingly. As it stands, the results nevertheless suggest that FTAs are likely to welfare-dominate CUs.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1448.
Date of creation: Aug 1996
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Other versions of this item:
- Cadot, Olivier & de Melo, Jaime & Olarraga, Marcelo, 1999. "Regional Integration and Lobbying for Tariffs against Nonmembers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 635-57, August.
- Cadot, O. & De Melo, J. & Olarreaga, M., 1996. "Regional Integration and Lobbying for Tariffs Against Non-Members," Research Papers by the Department of Economics, University of Geneva 96.08, Département des Sciences Économiques, Université de Genève.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
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