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National welfare effects of trade bloc enlargement

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  • Thilo W. Glebe

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    (Environmental Economics and Agricultural Policy Group, Technical University of Munich)

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    Abstract

    This paper analyses how the enlargement of a trade bloc will affect national welfare. We establish a partial equilibrium model of a trade bloc either operating as a monopoly with a competitive fringe or facing a duopolistic game in production taxes/subsidies. Given this framework, we demonstrate how member countries' welfare effects depend on their trade flow and the market power of the trade bloc. A numerical estimation of the effects of EU enlargement on the major grain corp marktets suggests that welfare effects are negliglible. Economic reasons are therefore unlikely to be a motivating force for further enlargement.

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    Bibliographic Info

    Paper provided by Technische Universität München, Environmental Economics and Agricultural Policy Group in its series Discussion Papers with number 022006.

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    Length: 14 pages
    Date of creation: 2006
    Date of revision: 2008
    Publication status: Published in Agricultural Economics Review (in work; title: Enlargement of the European Union: A movement towards the optimal trade bloc size?)
    Handle: RePEc:tuu:papers:022006

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    Related research

    Keywords: trade bloc; trade liberalisation; game theory; European Union;

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    References

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    1. Constantinos Syropoulos, 2002. "Optimum Tariffs and Retaliation Revisited: How Country Size Matters," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 707-727.
    2. Philip C. Abbott & Panu K. S. Kallio, 1996. "Implications of Game Theory for International Agricultural Trade," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 738-744.
    3. Carsten Daugbjerg & Alan Swinbank, 2004. "The CAP and EU Enlargement: Prospects for an Alternative Strategy to Avoid the Lock-in of CAP Support," Journal of Common Market Studies, Wiley Blackwell, vol. 42(1), pages 99-119, 02.
    4. Rabinowicz, Ewa, 1999. "Redesigning the CAP to Meet the Challenges of EU Enlargement and the WTO: What Can Agricultural Economic Research Contribute?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(3), pages 265-81, August.
    5. Christian Keuschnigg & Mirela Keuschnigg & Wilhelm Kohler, 2001. "The German Perspective on Eastern EU Enlargement," The World Economy, Wiley Blackwell, vol. 24(4), pages 513-542, 04.
    6. Kohler, Wilhelm K., 2004. "Eastern Enlargement of the EU : A Comprehensive Welfare Assessment," HWWA Discussion Papers 260, Hamburg Institute of International Economics (HWWA).
    7. David Blandford & Richard N. Boisvert & Linda Fulponi, 2003. "Nontrade Concerns: Reconciling Domestic Policy Objectives with Freer Trade in Agricultural Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 668-673.
    8. Richard Nahuis, 2002. "One size fits all? Accession to the internal market; an industry level assessment of EU enlargement," CPB Discussion Paper 14, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
    10. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 125-176, 04.
    11. 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, vol. 29(1), pages 81-85, February.
    12. Sumner, Daniel A., 2000. "Domestic support and the WTO negotiations," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(3), September.
    13. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
    14. Kohler, Wilhelm, 2004. "Eastern enlargement of the EU: a comprehensive welfare assessment," Journal of Policy Modeling, Elsevier, vol. 26(7), pages 865-888, October.
    15. S. E. Frandsen & H. G. Jensen & D. M. Vanzetti, 2000. "Expanding 'Fortress Europe': Agricultural Trade and Welfare Implications of European Enlargement for Non-member Regions," The World Economy, Wiley Blackwell, vol. 23(3), pages 309-329, 03.
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