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Free Trade Agreements As Dynamic Farsighted Networks

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  • James Lake

Abstract

In the presence of multilateral negotiations, are Free Trade Agreements (FTAs) necessary for, or will they prevent, global free trade? I answer this question using a dynamic farsighted model of network formation among asymmetric countries. Ultimately, FTAs prevent global free trade when there are two larger countries and one smaller country but FTAs can be necessary for global free trade when there are two smaller countries and one larger country. The model provides insights into the dynamics of recent real world negotiations and recent results in the literature on the empirical determinants of trade agreements.
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  • James Lake, 2017. "Free Trade Agreements As Dynamic Farsighted Networks," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 31-50, January.
    • Handle: RePEc:bla:ecinqu:v:55:y:2017:i:1:p:31-50
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    File URL: http://hdl.handle.net/10.1111/ecin.12360
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    17. Kamal Saggi & Alan Woodland & Halis Murat Yildiz, 2018. "On the Relationship between Preferential and Multilateral Trade Liberalization: The Case of Customs Unions," World Scientific Book Chapters, in: Kamal Saggi (ed.), Economic Analysis of the Rules and Regulations of the World Trade Organization, chapter 9, pages 186-222, World Scientific Publishing Co. Pte. Ltd..
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    Citations

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    Cited by:

    1. João Amador & Sónia Cabral, 2017. "Networks of Value-added Trade," The World Economy, Wiley Blackwell, vol. 40(7), pages 1291-1313, July.
    2. Christophe Bravard & Sudipta Sarangi & ANNE NOUWELAND & MARCO SLIKKER, 2016. "The Position Value for Partition Function Form Network Games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(2), pages 226-247, April.
    3. Lake, James & Nken, Moïse & Yildiz, Halis Murat, 2020. "Tariff bindings and the dynamic formation of Preferential Trade Agreements," Journal of International Economics, Elsevier, vol. 122(C).
    4. Moise Nken & Halis Murat Yildiz, 2017. "Implications of multilateral tariff bindings on the formation of preferential trade agreements and quest for global free trade," Working Papers 068, Ryerson University, Department of Economics.
    5. James Lake, 2019. "Dynamic formation of preferential trade agreements: The role of flexibility," Canadian Journal of Economics, Canadian Economics Association, vol. 52(1), pages 132-177, February.
    6. Lake, James & Roy, Santanu, 2017. "Are global trade negotiations behind a fragmented world of “gated globalization”?," Journal of International Economics, Elsevier, vol. 108(C), pages 117-136.
    7. João Amador & Sónia Cabral & Rossana Mastrandrea & Franco Ruzzenenti, 2018. "Who’s Who in Global Value Chains? A Weighted Network Approach," Open Economies Review, Springer, vol. 29(5), pages 1039-1059, November.
    8. Jihwan Do & Jung Hur & Sung-Ha Hwang & Larry D. Qiu, 2023. "Tariff diversity and FTA network," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(2), pages 333-360, May.
    9. László Á. Kóczy, 2018. "Partition Function Form Games," Theory and Decision Library C, Springer, number 978-3-319-69841-0, July.
    10. Moïse Nken & Halis Murat Yildiz, 2022. "Implications of multilateral tariff bindings on the extent of preferential trade agreement formation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 301-347, February.
    11. Berens, Stefan & Chochua, Lasha & Willmann, Gerald, 2021. "The farsighted stability of global trade policy arrangements," Kiel Working Papers 2193, Kiel Institute for the World Economy (IfW Kiel).
    12. Harold D Chiang & Yukun Ma & Joel Rodrigue & Yuya Sasaki, 2021. "Dyadic double/debiased machine learning for analyzing determinants of free trade agreements," Papers 2110.04365, arXiv.org, revised Dec 2022.
    13. Stefan Berens & Lasha Chochua & Gerald Willmann, 2021. "The Farsighted Stability of Global Tade Policy Arrangements," CESifo Working Paper Series 9213, CESifo.
    14. James Lake, 2016. "Why don't more countries form Customs Unions instead of Free Trade Agreements? The role of flexibility," Departmental Working Papers 1601, Southern Methodist University, Department of Economics.

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    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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