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Camouflaged Trade Agreements

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  • Elie Appelbaum

    ()
    (Department of Economics, York University, Toronto, Canada)

  • Mark Melatos

Abstract

We raise the possibility that at least some of the free trade areas observed in practice are customs unions in disguise. We distinguish between generalized and standard customs unions. While members of the former can choose different external tariff rates, members of the latter levy a common external tariff. The chief insight is that, in practice, it is typically not possible to differentiate between a generalized customs union and a free trade area. We demonstrate that generalized customs unions will be established and offer an explanation for the design of Article XXIV of the General agreement on Tariffs and Trade.

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Bibliographic Info

Paper provided by York University, Department of Economics in its series Working Papers with number 2012_2.

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Length: 27 pages
Date of creation: 30 May 2012
Date of revision:
Handle: RePEc:yca:wpaper:2012_2

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Keywords: Customs Union; Common External Tariff; Free Trade Area; General Agreement on Tariffs and Trade; Trade Agreement; World Trade Organization;

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  1. Horn, Henrik & Maggi, Giovanni & Staiger, Robert, 2007. "Trade Agreements as Endogenously Incomplete Contracts," CEPR Discussion Papers 6037, C.E.P.R. Discussion Papers.
  2. Giovanni Facchini & Peri Silva & Gerald Willmann, 2008. "The Customs Union issue: Why do we observe so few of them?," Center for Economic Studies - Discussion papers ces0827, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  3. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
  4. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization toward NonMembers?," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1531-1575, November.
  5. Martin Richardson, 1994. "Why A Free Trade Area? The Tariff Also Rises," Economics and Politics, Wiley Blackwell, vol. 6(1), pages 79-96, 03.
  6. Caroline Freund & Emanuel Ornelas, 2010. "Regional Trade Agreements," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 139-166, 09.
  7. Emanuel Ornelas, 2007. "Exchanging market access at the outsiders' expense: the case of customs unions," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 207-224, February.
  8. Jayjit Roy, 2008. "Do Customs Union Members Engage In More Bilateral Trade Than Free Trade Agreement Members?," Departmental Working Papers 0803, Southern Methodist University, Department of Economics.
  9. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
  10. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The Magazine for Economic Performance 313, Centre for Economic Performance, LSE.
  11. Riezman, Raymond, 1985. "Customs unions and the core," Journal of International Economics, Elsevier, vol. 19(3-4), pages 355-365, November.
  12. Magee, Christopher S.P., 2008. "New measures of trade creation and trade diversion," Journal of International Economics, Elsevier, vol. 75(2), pages 349-362, July.
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