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A Simple Model of The Juggernaut Effect of Trade Liberalisation

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  • Baldwin, Richard
  • Robert-Nicoud, Frédéric

Abstract

This paper posits a formal political economy model where the principle of reciprocity in multilateral trade talks results in the gradual elimination of tariffs. Reciprocity trade talks turn each nation’s exporters into anti-protectionists at home; they lower foreign tariffs by convincing their own government to lower home tariffs. Due to the new array of political forces, each government finds it politically optimal to remove tariffs that it previously found politically optimal to impose. The one-off global tariff cut then reshapes the political economy landscape via entry and exit – reducing the size/influence of import-competing sectors and increasing that of exporters. In the next round of trade talks governments therefore find it politically optimal to cut tariffs again. The process may continue until tariffs are eliminated.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6607.

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Date of creation: Dec 2007
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Handle: RePEc:cpr:ceprdp:6607

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Keywords: Lobbying; Multilateral Trade Negotiations;

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References

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  1. Christos Genakos & Tommaso Valletti, 2007. "Testing the "Waterbed" Effect in Mobile Telephony," CEP Discussion Papers dp0827, Centre for Economic Performance, LSE.
  2. Yashiv, Eran, 2006. "U.S. Labor Market Dynamics Revisited," IZA Discussion Papers 2455, Institute for the Study of Labor (IZA).
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Cited by:
  1. Marco Fugazza & Frédéric Robert-Nicoud, 2010. "The 'Emulator Effect' of the Uruguay Round on US Regionalism," CEP Discussion Papers dp0973, Centre for Economic Performance, LSE.
  2. Richard Baldwin, 2010. "Unilateral Tariff Liberalisation," NBER Working Papers 16600, National Bureau of Economic Research, Inc.
  3. Yasar, Mahmut, 2013. "Political Influence of Exporting and Import-Competing Firms: Evidence from Eastern European and Central Asian Countries," World Development, Elsevier, vol. 51(C), pages 154-168.

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