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Trade Agreements as Self‐Protection

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  • Jennifer Pédussel Wu

Abstract

Risks that are associated with an uncertain trading world have been dealt with using two different techniques in the literature: defensive, or insurance approaches, and preventive, or self‐protection approaches. Much of the earlier work centered on security issues but with the end of the Cold War attention turned toward preventive approaches. This paper argues that the incentive for loss prevention leads to some form of cooperative regional integration. Inclusion of uncertainty positively contributes to the overall customs union literature. The optimal level of integration, political or economic, is found and then simple comparative statics are used to discern the effects of some changes in the underlying parameters of the economy on that optimal level of integration. Multilateralism and regionalism are concluded to be complements.

Suggested Citation

  • Jennifer Pédussel Wu, 2005. "Trade Agreements as Self‐Protection," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 472-484, August.
    • Handle: RePEc:bla:reviec:v:13:y:2005:i:3:p:472-484
    DOI: 10.1111/j.1467-9396.2005.00518.x
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    1. Winters, L. Alan, 1996. "Regionalism versus multilateralism," Policy Research Working Paper Series 1687, The World Bank.
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    Cited by:

    1. Ravinder Rena, 2008. "WTO and Agricultural Trade – Some Issues and Perspectives," KASBIT Business Journals (KBJ), Khadim Ali Shah Bukhari Institute of Technology (KASBIT), vol. 1, pages 49-60, December.
    2. Elie Appelbaum & Mark Melatos, 2012. "How Does Uncertainty Affect the Choice of Trade AgreementsF," Working Papers 2012_1, York University, Department of Economics.
    3. Pédussel Wu, Jennifer, 2004. "Measuring and explaining levels of regional economic integration," ZEI Working Papers B 12-2004, University of Bonn, ZEI - Center for European Integration Studies.
    4. Pédussel Wu, Jennifer & Qari, Salmai & Banach, Clark & Azarhoushang, Behzad, 2017. "A database for investigating foreign direct investment and regional trade," IPE Working Papers 94/2017, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    5. Elie Appelbaum & Mark Melatos, 2014. "Option Values and the Choice of Trade Agreements," Working Papers 2014_1, York University, Department of Economics.
    6. Abreo, Carlos & Carrillo, Eduardo & Pédussel Wu, Jennifer, 2023. "Characteristics of Colombian inward foreign direct investment," IPE Working Papers 212/2023, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    7. Elie Appelbaum & Mark Melatos, 2016. "How Can Uncertainty Affect the Choice of Trade Agreements?," The Economic Record, The Economic Society of Australia, vol. 92(297), pages 153-172, June.
    8. Appelbaum, Elie & Melatos, Mark, 2024. "Preferential trade agreements as insurance," Journal of International Money and Finance, Elsevier, vol. 148(C).

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    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration

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