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Exchanging market access at the outsiders' expense: the case of customs unions

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  • Emanuel Ornelas

Abstract

Under a customs union, countries can exchange preferential market access by coordinating external tariffs to shift profits from excluded countries. I show that the exporting rents resulting from this coordination can offset trade diversion losses produced by the union, even if its members are relatively small in world markets. Such gains come, however, at the expense of excluded countries. I show that small countries can use customs unions also to foster multilateral cooperation, by increasing the incentives of excluded countries to support global free trade.

Suggested Citation

  • Emanuel Ornelas, 2007. "Exchanging market access at the outsiders' expense: the case of customs unions," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 207-224, February.
  • Handle: RePEc:cje:issued:v:40:y:2007:i:1:p:207-224
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    Citations

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    Cited by:

    1. Appelbaum, Elie & Melatos, Mark, 2012. "Camouflaged Trade Agreements," Working Papers 2012-11, University of Sydney, School of Economics.
    2. Facchini, Giovanni & Silva, Peri & Willmann, Gerald, 2013. "The customs union issue: Why do we observe so few of them?," Journal of International Economics, Elsevier, vol. 90(1), pages 136-147.
    3. Valeria Groppo & Roberta Piermartini, 2014. "Trade Policy Uncertainty and the WTO," Discussion Papers of DIW Berlin 1437, DIW Berlin, German Institute for Economic Research.
    4. Mai, Joseph & Stoyanov, Andrey, 2018. "Tariff Cooperation in Free Trade Areas," MPRA Paper 84398, University Library of Munich, Germany.
    5. Kamal Saggi & Woan Foong Wong & Halis Murat Yildiz, 2017. "Preferential Trade Agreements and Rules of the Multilateral Trading System," Working Papers 067, Ryerson University, Department of Economics.
    6. Emanuel Ornelas, 2012. "Preferential Trade Agreements and the Labor Market," CEP Discussion Papers dp1117, Centre for Economic Performance, LSE.
    7. Crivelli, Pramila, 2016. "Regionalism and falling external protection in high and low tariff members," Journal of International Economics, Elsevier, vol. 102(C), pages 70-84.
    8. 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.
    9. repec:ilo:ilowps:469183 is not listed on IDEAS
    10. Giovanni Facchini & Peri Silva & Gerald Willmann, 2015. "The Political Economy of Preferential Trade Arrangements: An Empirical Investigation," Discussion Papers 2015-16, University of Nottingham, GEP.
    11. Costa Lima, Rafael & Moreira, Humberto & Verdier, Thierry, 2012. "Centralized decision making against informed lobbying," CEPR Discussion Papers 9199, C.E.P.R. Discussion Papers.
    12. Rafael Lima & Humberto Moreira & Thierry Verdier, 2008. "Lobbying and Information Transmission in Customs Unions," Working Papers 09_01, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
    13. Pramila Crivelli, 2014. "Regionalism and Falling External Protection in High and Low Tariff Members," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 14082, Institut d'Economie et Econométrie, Université de Genève.
    14. Sajal Lahiri & Peri Silva, 2016. "Potential Pareto-Improving Move Toward Most Favored Nation Tariffs," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1086-1104, April.
    15. György Simon, Jr, 2010. "On The Customs Union Of Belarus, Kazakhstan And Russia," Economic Annals, Faculty of Economics, University of Belgrade, vol. 55(184), pages 7-28, January –.

    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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