Trade regimes and GATT: resource-intensive vs. knowledge intensive growth
AbstractTrading blocks can help or hinder the liberalization of world trade. A determining factor is whether trade within the block is organized around traditional comparative advantages, or around economies of scale. Regional free trade agreements such as NAFTA can be a substitutes for global free trade when they are based on traditional comparative advantages; then each regional market develops market power and incentives to impose tariffs on the rest of the word. Alternatively, regional trade agreements can be complementary to global free trade. This occurs when the blocks are organized around the exploitation of economies of scale and based on knowledge-intensive sectors. I establish that external economies of scale produce incentives for expanded trade; they can defeat the standard argument for "optimal tariffs" and mitigate another negative feature of trading blocks: their tendency to divert trade from efficient to inefficient sources. The emergence of regional blocks organized around economies of scale can therefore lead to increasingly open international markets. I discuss policy implications for the EU and for free trade in the Americas.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 8493.
Date of creation: 1996
Date of revision:
international trade; global policy; trade policy; trading blocks; economies of scale;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F53 - International Economics - - International Relations and International Political Economy - - - International Agreements and Observance; International Organizations
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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