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Can Bilateral Trade Agreements Help Induce Free Trade

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  • Raymond Riezman

Abstract

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.

Suggested Citation

  • Raymond Riezman, 1999. "Can Bilateral Trade Agreements Help Induce Free Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 751-766, May.
  • Handle: RePEc:cje:issued:v:32:y:1999:i:3:p:751-766
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    References listed on IDEAS

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    1. Konstantine Gatsios & Larry Karp, 1991. "Delegation Games in Customs Unions," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 391-397.
    2. 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.
    3. 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.
    4. Frankel, Jeffrey A & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements: Natural or Supernatural," American Economic Review, American Economic Association, vol. 86(2), pages 52-56, May.
    5. Kowalczyk, Carsten & Sjostrom, Tomas, 1994. "Bringing GATT into the Core," Economica, London School of Economics and Political Science, vol. 61(243), pages 301-317, August.
    6. 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).
    7. John Kennan & Raymond Riezman, 2013. "Optimal Tariff Equilibria with Customs Unions," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 5, pages 53-66 World Scientific Publishing Co. Pte. Ltd..
    8. Jon D. Haveman, 1996. "Some Welfare Effects of Sequential Customs Union Formation," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 941-958, November.
    9. 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.
    10. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
    11. Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. 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.
    2. Emanuel Ornelas, 2000. "Free Trade Areas with Politically Active Oligopolies," Econometric Society World Congress 2000 Contributed Papers 1457, Econometric Society.
    3. Baldwin, Richard & Jaimovich, Dany, 2012. "Are Free Trade Agreements contagious?," Journal of International Economics, Elsevier, pages 1-16.
    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. Lisandro Abrego & Raymond Riezman & John Whalley, 2002. "How Often Are Propositions On The Effects Of Regional Trade Agreements Theoretical Curiosa And When Should They Guide Policy?," UWO Department of Economics Working Papers 20024, University of Western Ontario, Department of Economics.
    6. Carsten Kowalczyk & Raymond Riezman, 2009. "Trade Agreements," CESifo Working Paper Series 2660, CESifo Group Munich.
    7. Lisandro Abrego & Raymond Riezman & John Whalley, 2013. "How often are propositions on the effects of regional trade agreements theoretical curiosa?," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 9, pages 129-148 World Scientific Publishing Co. Pte. Ltd..
    8. David Vines & Monika Mrazova, 2008. "Is the WTO's Article XXIV Bad?," Economics Series Working Papers 417, University of Oxford, Department of Economics.
    9. M. Ayhan Kose & Raymond Riezman, 2000. "Small Countries and Preferential Trade Agreements "How Severe is the Innocent Bystander Problem?"," CESifo Working Paper Series 253, CESifo Group Munich.
    10. Lake, James & Yildiz, Halis M., 2016. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Journal of International Economics, Elsevier, pages 213-233.
    11. Kamal Saggi & Alan Woodland & Halis Murat Yildiz, 2013. "On the Relationship between Preferential and Multilateral Trade Liberalization: The Case of Customs Unions," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 63-99, February.
    12. Baldwin, Richard, 2008. "Big-Think Regionalism: a Critical Survey," CEPR Discussion Papers 6874, C.E.P.R. Discussion Papers.
    13. repec:eee:inecon:v:108:y:2017:i:c:p:117-136 is not listed on IDEAS
    14. Stoyanov, Andrey & Yildiz, Halis Murat, 2015. "Preferential versus multilateral trade liberalization and the role of political economy," European Economic Review, Elsevier, vol. 80(C), pages 140-164.
    15. Ben Zissimos, 2011. "Why are Trade Agreements Regional?," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 32-45, February.
    16. Lake, James & Roy, Santanu, 2017. "Are global trade negotiations behind a fragmented world of “gated globalization”?," Journal of International Economics, Elsevier, pages 117-136.
    17. Melatos, Mark & Woodland, Alan, 2007. "Endogenous trade bloc formation in an asymmetric world," European Economic Review, Elsevier, vol. 51(4), pages 901-924, May.
    18. Saggi, Kamal & Yildiz, Halis Murat, 2010. "Bilateralism, multilateralism, and the quest for global free trade," Journal of International Economics, Elsevier, vol. 81(1), pages 26-37, May.
    19. Mrázová, Monika & Vines, David & Zissimos, Ben, 2013. "Is the GATT/WTO's Article XXIV bad?," Journal of International Economics, Elsevier, vol. 89(1), pages 216-232.
    20. Lisandro Abrego & Raymond Riezman & John Whalley, 2001. "How Often Are Propositions on the Effects of Customs Unions Theoretical Curiosa and When Should They Guide Policy?," NBER Working Papers 8304, National Bureau of Economic Research, Inc.
    21. repec:smu:ecowpa:1409 is not listed on IDEAS

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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