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Trade Agreements and the Nature of Price Determination

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  • Pol Antras
  • Robert W. Staiger

Abstract

According to the terms-of-trade theory, negotiations over tariffs alone, coupled with an effective market access preservation rule, can bring governments to the efficiency frontier. In this paper, we show that the nature of international price determination is important for this central result of the terms-of-trade theory. While the received theory assumes that international prices are fully disciplined by aggregate market clearing conditions, we show here that support for "shallow" integration is overturned, and instead a need for "deep" integration is suggested ? wherein direct negotiations occur over both border and behind-the-border policies ? if international prices are determined through bargaining.

Suggested Citation

  • Pol Antras & Robert W. Staiger, 2012. "Trade Agreements and the Nature of Price Determination," American Economic Review, American Economic Association, vol. 102(3), pages 470-476, May.
    • Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:470-76
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    References listed on IDEAS

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    1. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
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    Cited by:

    1. Sauré, Philip, 2014. "Domestic policies in self-enforcing trade agreements," European Economic Review, Elsevier, vol. 68(C), pages 19-30.
    2. Bård Harstad, 2022. "Trade, Trees, and Contingent Trade Agreements," CESifo Working Paper Series 9596, CESifo.
    3. Bård Harstad, 2020. "Trade and Trees: How Trade Agreements Can Motivate Conservation Instead of Depletion," CESifo Working Paper Series 8569, CESifo.
    4. Ara, Tomohiro & Ghosh, Arghya, 2016. "Tariffs, vertical specialization and oligopoly," European Economic Review, Elsevier, vol. 82(C), pages 1-23.
    5. Petros C. Mavroidis & Robert Wolfe, 2016. "Private Standards and the WTO: Reclusive No More," RSCAS Working Papers 2016/17, European University Institute.
    6. Latorre, María C. & Yonezawa, Hidemichi, 2018. "Stopped TTIP? Its potential impact on the world and the role of neglected FDI," Economic Modelling, Elsevier, vol. 71(C), pages 99-120.
    7. Blanchard, Emily J., 2015. "A Shifting Mandate: International Ownership, Global Fragmentation, and a Case for Deeper Integration under the WTO," World Trade Review, Cambridge University Press, vol. 14(1), pages 87-99, January.
    8. Obashi, Ayako, 2019. "Trade agreements with cross-border unbundling," Journal of the Japanese and International Economies, Elsevier, vol. 53(C), pages 1-1.
    9. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    10. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    11. Meng, Xianwei & Wei, Xuan, 2016. "A Dynamic Model of Effects of Effects of Trade and Environmental Policies on Firms' Offshoring and Clean Technology Adoption Decisions," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236064, Agricultural and Applied Economics Association.
    12. Richard Chisik & Sara Rohany Tabatabai, 2022. "International sourcing, complementary inputs, and the structure of trade agreements: Deep, shallow, narrow, and wide," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1782-1805, October.
    13. McCalman, Phillip, 2018. "International trade, income distribution and welfare," Journal of International Economics, Elsevier, vol. 110(C), pages 1-15.
    14. Pol Antràs & Robert W. Staiger, 2012. "Offshoring and the Role of Trade Agreements," American Economic Review, American Economic Association, vol. 102(7), pages 3140-3183, December.
    15. Zdzisław W. Puślecki, 2016. "Bilateral trade agreements and the rise of global supply chains," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(5), pages 17-23, October.

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