Why have governments found reciprocal trade agreements such as GATT to be a more effective means of facilitating trade liberalization than unilateral initiatives? We provide in this paper an analytic framework for the study of reciprocal trade agreements. We use this framework to establish three main results. First, we argue that political-economy factors are important for explaining the range of trade policies observed, but that these factors can not explain why governments seek reciprocal trade agreements as an institutional form for implementing their preferred policies. Rather, whether or not governments are politically motivated, Johnson (1953-54) was right: The central purpose of a reciprocal trade agreement is to eliminate the terms-of-trade driven policies that arise in the absence of such an agreement. Second, we establish an economic interpretation of the principles of reciprocity and nondiscrimination that represent the foundation of postwar reciprocal trade agreements. Finally, we offer new insights regarding the treatment of export subsidies in reciprocal trade agreements.
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1150.
Length: Date of creation: Jan 1996 Date of revision: Handle: RePEc:nwu:cmsems:1150
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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.:
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Gene M. Grossman & Elhanan Helpman, 1992.
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[Downloadable!] (restricted)
Kyle Bagwell & Robert W. Staiger, 1989.
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[Downloadable!]
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.)
Paolo Epifani & Juliette Vitaloni, 2003.
"‘GATT-Think’ with Asymmetric Countries,"
CESPRI Working Papers
141, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Mar 2003.
[Downloadable!]
Kyle Bagwell & Robert W. Staiger, 1995.
"Protection and the Business Cycle,"
Discussion Papers
1130, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Kyle Bagwell & Robert W. Staiger, 1997.
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NBER Working Papers
6049, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
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