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Non-Preferential Trading Clubs

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Author Info
Raimondos-Møller, Pascalis
Woodland, Alan D

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Abstract

This Paper examines the welfare implications of non-discriminatory tariff reforms by a subset of countries, which we term a non-preferential trading club. We show that there exist coordinated tariff reforms, accompanied by appropriate income transfers between these countries, which unambiguously increase the welfare of these member countries while leaving the welfare of non-members unaltered. These tariff reforms are chosen to maintain world prices at their pre-club levels and, in this respect, the trading clubs act in a Kemp-Wan-like manner. In terms of economic policy implications, our results show that there exist regional, MFN-consistent arrangements that lead to Pareto improvements in world welfare. Open regionalism is an example of such trading arrangements.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3572.

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Date of creation: Oct 2002
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Handle: RePEc:cpr:ceprdp:3572

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Related research
Keywords: customs unions; Kemp-Wan proposition; non-preferential tariff policies; open regionalism; trading clubs;

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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration

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References listed on IDEAS
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. Hatta, Tatsuo & Fukushima, Takashi, 1979. "The welfare effect of tariff rate reductions in a many country world," Journal of International Economics, Elsevier, vol. 9(4), pages 503-511, November. [Downloadable!] (restricted)
  2. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-53, March. [Downloadable!] (restricted)
  3. Neary, J Peter, 1997. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs and Subsidies to HIgh-Technology Industries," CEPR Discussion Papers 1740, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Mark Melatos & Alan D. Woodland, 2007. "Pareto-optimal Delegation in Customs Unions," Review of International Economics, Blackwell Publishing, vol. 15(3), pages 441-461, 08. [Downloadable!] (restricted)
  5. Sontheimer, Kevin C, 1971. "The Existence of International Trade Equilibrium with Trade Tax-Subsidy Distortions," Econometrica, Econometric Society, vol. 39(6), pages 1015-35, November. [Downloadable!] (restricted)
  6. Murray C. Kemp & Koji Shimomura, 2001. "A Second Elementary Proposition Concerning the Formation of Customs Unions," The Japanese Economic Review, Japanese Economic Association, vol. 52(1), pages 64-69. [Downloadable!] (restricted)
  7. Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August. [Downloadable!] (restricted)
  8. Richardson, Martin, 1995. "On the Interpretation of the Kemp/Wan Theorem," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 696-703, October. [Downloadable!] (restricted)
  9. Raimondos-Moller, Pascalis & Woodland, Alan D., 2006. "Non-preferential trading clubs," Journal of International Economics, Elsevier, vol. 68(1), pages 79-91, January. [Downloadable!] (restricted)
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  10. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January. [Downloadable!] (restricted)
  11. Diewert, W E & Turunen-Red, A H & Woodland, A D, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Blackwell Publishing, vol. 56(2), pages 199-215, April. [Downloadable!] (restricted)
  12. Murray Kemp & Henry Wan, 1986. "The comparison of second-best equilibria: The case of customs unions," Journal of Economics, Springer, vol. 5(1), pages 161-167, December. [Downloadable!] (restricted)
  13. Turunen-Red, Arja H & Woodland, Alan D, 1991. "Strict Pareto-Improving Multilateral Reforms of Tariffs," Econometrica, Econometric Society, vol. 59(4), pages 1127-52, July. [Downloadable!] (restricted)
  14. Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June. [Downloadable!] (restricted)
  15. Fukushima, Takashi & Kim, Namdoo, 1989. "Welfare improving tariff changes : A case of many goods and countries," Journal of International Economics, Elsevier, vol. 26(3-4), pages 383-388, May. [Downloadable!] (restricted)
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Cited by:
(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. Raimondos-Moller, Pascalis & Woodland, Alan D., 2004. "Non-Preferential Trading Clubs," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Henk C. Kranendonk & Jan Bonenkamp & Johan P. Verbruggen, 2004. "A Leading Indicator for the Dutch Economy – Methodological and Empirical Revision of the CPB System," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  3. Subhayu Bandyopadhyay & Sajal Lahiri & Howard J. Wall, 2009. "Cross-border lobbying in preferential trading agreements: implications for external tariffs," Working Papers 2009-041, Federal Reserve Bank of St. Louis. [Downloadable!]
  4. Subhayu Bandyopadhyay & Sajal Lahiri & Suryadipta Roy, 2008. "Political asymmetry and common external tariff in a customs union," Working Papers 2007-038, Federal Reserve Bank of St. Louis. [Downloadable!]
  5. Subhayu Bandyopadhyay & Sajal Lahiri & Suryadipta Roy, 2008. "Enlargement and common external tariff in a political-economic model of customs union," Working Papers 2008-022, Federal Reserve Bank of St. Louis. [Downloadable!]
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