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Is the GATT/WTO's Article XXIV bad?

  • Mrázová, Monika
  • Vines, David
  • Zissimos, Ben

The GATT/WTO Article XXIV prevents a customs union (CU) from raising its common external tariff. In this paper, we compare CU formation with and without this Article XXIV constraint. We show, in a multi-country oligopoly model, that for a given CU structure, Article XXIV improves world welfare by lowering trade barriers. However, we also show that Article XXIV has a composition effect on CU formation: it affects the endogenous choice of CUs. By encouraging more symmetric CUs, Article XXIV causes more trade to be subject to trade barriers. As a result, Article XXIV may be ‘bad’ for world welfare.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 89 (2013)
Issue (Month): 1 ()
Pages: 216-232

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Handle: RePEc:eee:inecon:v:89:y:2013:i:1:p:216-232
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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