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Gradual Trade Liberalization With Sluggish Capital Movement

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  • HanSung Kim
  • Kar‐Yiu Wong

Abstract

. This paper analyses how domestic sluggish capital movement can affect multilateral trade negotiations between countries. In multilateral trade talks, including the current Doha Round of trade talks organized by the World Trade Organization, countries take steps to liberalize even though they seem to be moving towards the ultimate free trade equilibrium. This paper argues that when capital moves sluggishly between sectors in an economy, there are cases in which countries do not want to move to the ultimate free trade equilibrium immediately. Instead, they find it more beneficial if they simultaneously move gradually, with their tariffs lowered step by step.

Suggested Citation

  • HanSung Kim & Kar‐Yiu Wong, 2008. "Gradual Trade Liberalization With Sluggish Capital Movement," Pacific Economic Review, Wiley Blackwell, vol. 13(1), pages 134-151, February.
    • Handle: RePEc:bla:pacecr:v:13:y:2008:i:1:p:134-151
    DOI: 10.1111/j.1468-0106.2007.00363.x
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    References listed on IDEAS

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    1. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-153, March.
    2. Ben Lockwood & Jonathan P. Thomas, 2002. "Gradualism and Irreversibility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 339-356.
    3. Furusawa, Taiji & Lai, Edwin L. -C., 1999. "Adjustment costs and gradual trade liberalization," Journal of International Economics, Elsevier, vol. 49(2), pages 333-361, December.
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    Cited by:

    1. Jin Suk Park & Eunju Hwang, 2023. "Sectoral FTA gains, conflicts, and the role of interindustry factor mobility: Evidence from Korea's free trade agreement," Pacific Economic Review, Wiley Blackwell, vol. 28(1), pages 97-123, February.

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