Can Bilateralism Ease the Pains of Multilateral Trade Liberalization?
AbstractUsing the influence-driven approach to endogenous trade-policy determination, we show how a free-trade agreement (FTA) with rules of origin can work as a device to compensate losers from trade liberalization. The FTA constructed in this paper is characterized by external tariff structures that are negatively correlated across member countries, ensuring efficiency gains and, through reduced average protection, compatibility with the multilateral trading system’s requirements. It is also politically viable and we demonstrate that, in the countries concerned, governments are willing to include its formation in the political agenda even though, in equilibrium, political contributions from producer lobbies decline after the agreement.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1878.
Date of creation: May 1998
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Other versions of this item:
- Cadot, Olivier & de Melo, Jaime & Olarreaga, Marcelo, 2001. "Can bilateralism ease the pains of multilateral trade liberalization?," European Economic Review, Elsevier, vol. 45(1), pages 27-44, January.
- Cadot, O. & de Melo, J. & Olarreaga, M., 1998. "Can Bilateralism Ease the Pains of Multilateral Trade Liberalization?," Research Papers by the Department of Economics, University of Geneva 98.11, 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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