Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Theory of Trade Policy and Trade Agreements: A Critique

Contents:

Author Info

  • Wilfred J. Ethier

    ()
    (Department of Economics, University of Pennsylvania)

Abstract

During the past half century, multilateral trade liberalization has reduced tariffs to historically low levels. The Received Theory of multilateral trade agreements, based solely on terms-of-trade externalities between national governments, offers an explanation that has become the conventional wisdom among international trade theorists. But it displays two puzzles that cast doubt on its practical relevance: the Terms-of-Trade Puzzle and the Anti-Trade-Bias Puzzle. This paper examines the consistency of the implications of the Received Theory with actual trade policy. The basic conclusion is that the theory is inconsistent with reality. Furthermore, it is the role of terms-of-trade externalities — the central component of the Received Theory — that is the sole cause of this inconsistency.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://economics.sas.upenn.edu/system/files/working-papers/06-013.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 06-013.

as in new window
Length: 36 pages
Date of creation: 23 Nov 2002
Date of revision: 05 Jun 2006
Handle: RePEc:pen:papers:06-013

Contact details of provider:
Postal: 3718 Locust Walk, Philadelphia, PA 19104
Phone: 215-898-9992
Fax: 215-573-2378
Email:
Web page: http://economics.sas.upenn.edu/pier
More information through EDIRC

Related research

Keywords: Political externalities; trade agreements; the Received Theory; the Terms-of-Trade Puzzle; the Anti-Trade-Bias Puzzle;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  2. Phillip McCalman, 2004. "Protection for Sale and Trade Liberalization: an Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 12(1), pages 81-94, 02.
  3. Susumu Imai & Hajime Katayama & Kala Krishna, 2006. "Protection for Sale or Surge Protection?," NBER Working Papers 12258, National Bureau of Economic Research, Inc.
  4. Grossman, G.M. & Helpman, E., 1993. "Trade Wars and Trade Talks," Papers 1-93, Tel Aviv.
  5. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
  6. David Austen-Smith, 1991. "Rational Consumers And Irrational Voters: A Review Essay On Black Hole Tariffs And Endogenous Policy Theory, By Stephen Magee, William Brock And Leslie Young, Cambridge University Press 1989," Economics and Politics, Wiley Blackwell, vol. 3(1), pages 73-92, 03.
  7. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, vol. 47(2), pages 345-370, April.
  8. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoglu, 2002. ""Protection For Sale" In A Developing Country: Democracy Vs. Dictatorship," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 497-508, August.
  9. Arye L. Hillman & Ngo Van Long & Peter Moser, 1995. "Modelling Reciprocal Trade Liberalization: The Political-economy and National-welfare Perspectives," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 131(III), pages 503-515, September.
  10. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  11. Hillman, Arye L, 1990. " Protectionist Policies as the Regulation of International Industry," Public Choice, Springer, vol. 67(2), pages 101-10, November.
  12. Wilfred J. Ethier, 2004. "Political Externalities, Nondiscrimination, and a Multilateral World," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 303-320, 08.
  13. Kyle Bagwell & Robert W. Staiger, 1997. "Reciprocity, Non-discrimination and Preferential Agreements in the Multilateral Trading System," NBER Working Papers 5932, National Bureau of Economic Research, Inc.
  14. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
  15. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
  16. Finger, J. Michael, 1990. "The GATT as international discipline over trade restrictions : a public choice approach," Policy Research Working Paper Series 402, The World Bank.
  17. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Persson, Lars, 2012. "Environmental policy and lobbying in small open economies," Resource and Energy Economics, Elsevier, vol. 34(1), pages 24-35.
  2. Wolf-Heimo Grieben & Fuat Sener, 2009. "Labor Unions, Globalization, and Mercantilism," CESifo Working Paper Series 2889, CESifo Group Munich.
  3. Wilfred J. Ethier, 2013. "The Trade Agreement Embarrassment, Second Version," PIER Working Paper Archive 13-049, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 02 Sep 2013.
  4. Rolf J. Langhammer, 2010. "Unordnung in der internationalen Handelsordnung: Befunde, Gründe, Auswirkungen und Therapien," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(1), pages 75-98, 02.
  5. Joseph F. Francois & Bernard Hoekman, 2009. "Services Trade and Policy," Economics working papers 2009-03, Department of Economics, Johannes Kepler University Linz, Austria.
  6. Monika Mrazova, 2009. "Trade negotiations when market access matters," Economics Series Working Papers 447, University of Oxford, Department of Economics.
  7. Xenia Matschke, 2005. "Costly Revenue-Raising and the Case for Favoring Import-Competing Industries," Working papers 2005-28, University of Connecticut, Department of Economics, revised Apr 2007.
  8. Barbara Dluhosch & Daniel Horgos, 2012. "(When) Does Tit-for-Tat Diplomacy in Trade Policy Pay Off?," FIW Working Paper series 085, FIW.
  9. Per G. Fredriksson & Xenia Matschke & Jenny Minier, 2008. "Environmental Policy in Majoritarian Systems," Working papers 2008-01, University of Connecticut, Department of Economics, revised Sep 2009.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pen:papers:06-013. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dolly Guarini).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.