IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v89y2013i1p216-232.html
   My bibliography  Save this article

Is the GATT/WTO's Article XXIV bad?

Author

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

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:inecon:v:89:y:2013:i:1:p:216-232
    DOI: 10.1016/j.jinteco.2012.07.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S002219961200133X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    2. Eric W. Bond & Raymond G. Riezman & Constantinos Syropoulos, 2013. "A strategic and welfare theoretic analysis of free trade areas," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 8, pages 101-127 World Scientific Publishing Co. Pte. Ltd..
    3. Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1214-1245, December.
    4. Ornelas, Emanuel, 2005. "Trade creating free trade areas and the undermining of multilateralism," European Economic Review, Elsevier, vol. 49(7), pages 1717-1735, October.
    5. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
    6. Seidmann, Daniel J., 2009. "Preferential trading arrangements as strategic positioning," Journal of International Economics, Elsevier, vol. 79(1), pages 143-159, September.
    7. Caroline Freund & Emanuel Ornelas, 2010. "Regional Trade Agreements," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 139-166, September.
    8. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    9. Richard E. Baldwin, 2011. "Multilateralising Regionalism: Spaghetti Bowls as Building Blocks on the Path to Global Free Trade," Chapters,in: International Handbook on the Economics of Integration, Volume I, chapter 2 Edward Elgar Publishing.
    10. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
    11. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
    12. Bhagwati, Jagdish, 2008. "Termites in the Trading System: How Preferential Agreements Undermine Free Trade," OUP Catalogue, Oxford University Press, number 9780195331653.
    13. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, vol. 73(1), pages 1-30, September.
    14. 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.
    15. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The Magazine for Economic Performance 313, Centre for Economic Performance, LSE.
    16. Ornelas, Emanuel, 2005. "Endogenous free trade agreements and the multilateral trading system," Journal of International Economics, Elsevier, vol. 67(2), pages 471-497, December.
    17. Reza Oladi & Hamid Beladi, 2008. "Is Regionalism Viable? A Case for Global Free Trade," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 293-300, May.
    18. 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.
    19. Goto, Junichi & Hamada, Koichi, 1999. "Regional Economic Integration and Article XXIV of the GATT," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 555-570, November.
    20. Syropoulos, Constantinos, 1999. "Customs Unions and Comparative Advantage," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 239-266, April.
    21. Bhagwati, Jagdish & Greenaway, David & Panagariya, Arvind, 1998. "Trading Preferentially: Theory and Policy," Economic Journal, Royal Economic Society, vol. 108(449), pages 1128-1148, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xuepeng Liu & Emanuel Ornelas, 2014. "Free Trade Agreements and the Consolidation of Democracy," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 29-70, April.
    2. Missios, Paul & Saggi, Kamal & Yildiz, Halis Murat, 2016. "External trade diversion, exclusion incentives and the nature of preferential trade agreements," Journal of International Economics, Elsevier, vol. 99(C), pages 105-119.
    3. 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.
    4. 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.
    5. Jorzik, Nathalie & Mueller-Langer, Frank, 2013. "Multilateral Stability and Efficiency of Trade Agreements: A Network Formation Approach," Discussion Papers in Economics 14587, University of Munich, Department of Economics.
    6. Ben Zissimos, 2011. "Why are Trade Agreements Regional?," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 32-45, February.
    7. Matthew T. Cole & James Lake & Ben Zissimos, 2017. "Contesting an International Trade Agreement," Working Papers 1703, California Polytechnic State University, Department of Economics.
    8. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, Elsevier.

    More about this item

    Keywords

    Coalition formation game; Customs union; Protection; Trade block; Trade liberalization;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:89:y:2013:i:1:p:216-232. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.