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Can Bilateral Trade Agreements Help Induce Free Trade

  • Raymond Riezman

In this paper, a very simple question is asked. Does the fact that trading blocs can form bilateral trade agreements make free trade less likely to occur? The answer is that it depends on the size distribution of the trading blocs. When there is one large trading block along with some smaller ones, then bilateral trade agreements can facilitate the attainment of free trade. If trading blocs are of roughly equivalent size, then bilateral trade agreements allow groups of trading blocs to more effectively monopolize world trade, in which case they may make free trade less likely.

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 32 (1999)
Issue (Month): 3 (May)
Pages: 751-766

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Handle: RePEc:cje:issued:v:32:y:1999:i:3:p:751-766
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  1. Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc.
  2. Gatsios, Konstantine & Karp, Larry, 1989. "Delegation Games in Customs Unions," CEPR Discussion Papers 337, C.E.P.R. Discussion Papers.
  3. Carsten Kowalczyk & Tomas Sjostrom, 1993. "Bringing GATT into the Core," NBER Working Papers 4343, National Bureau of Economic Research, Inc.
  4. Cole, Harold L. & Obstfeld, Maurice, 1991. "Commodity trade and international risk sharing : How much do financial markets matter?," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 3-24, August.
  5. John Kennan & Raymond Riezman, 1990. "Optimal Tariff Equilibria with Customs Unions," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 70-83, February.
  6. Lawrence H. Summers, 1991. "Regionalism and the world trading system," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 295-301.
  7. Jeffrey A. Frankel, Ernesto Stein, and Shang-Jin Wei., 1996. "Regional Trading Arrangements: Natural or Super-Natural?," Center for International and Development Economics Research (CIDER) Working Papers C96-059, University of California at Berkeley.
  8. Haverman, J.D., 1993. "Some Welfare Effects of Dynamic Customs Union Formation," Papers 93-109, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
  9. Jon D. Haveman, 1996. "Some Welfare Effects of Sequential Customs Union Formation," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 941-58, November.
  10. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
  11. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
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