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Trade regimes and Gatt: resource intensive vs. knowledge intensive growth, Chapter 10

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  • Chichilnisky, Graciela

Abstract

Trading 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 world. 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 arguments 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8813.

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Date of creation: 1996
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Handle: RePEc:pra:mprapa:8813

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Related research

Keywords: free trade; comparative advantage; economies of scale; external economies of scale; knowledge-intensive sectors; knowledge revolution; regional trade agreements; NAFTA; EU; Gatt; trade blocks;

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References

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  1. Chichilnisky,Graciela & Heal,Geoffrey M., 1987. "The Evolving International Economy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521267168.
  2. Kennan, John & Riezman, Raymond, 1988. "Do Big Countries Win Tariff Wars?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
  3. Chichilnisky, Graciela, 1981. "Terms of trade and domestic distribution : Export-led growth with abundant labour," Journal of Development Economics, Elsevier, Elsevier, vol. 8(2), pages 163-192, April.
  4. Riezman, Raymond, 1985. "Customs unions and the core," Journal of International Economics, Elsevier, Elsevier, vol. 19(3-4), pages 355-365, November.
  5. Chichilnisky, Graciela, 1995. "Strategies for trade liberalization in the Americas," MPRA Paper 8393, University Library of Munich, Germany.
  6. Chichilnisky, Graciela, 1993. "North-South trade and the dynamics of renewable resources," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 4(2), pages 219-248, December.
  7. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 851-74, September.
  8. John Kennan & Raymond Riezman, 1990. "Optimal Tariff Equilibria with Customs Unions," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 23(1), pages 70-83, February.
  9. Chichilnisky, Graciela, 1986. "A general equilibrium theory of North-South trade," MPRA Paper 8810, University Library of Munich, Germany.
  10. Lloyd A. Metzler, 1949. "Tariffs, the Terms of Trade, and the Distribution of National Income," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 57, pages 1.
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Cited by:
  1. L├╝bcke, Britta & Piazolo, Daniel, 1998. "Wohlfahrtseffekte einer nordatlantischen Handelsliberalisierung," Kiel Working Papers 885, Kiel Institute for the World Economy.

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