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Measuring the benefits of unilateral trade liberalization, Part I: static models

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  • Carlos E. J. M. Zarazaga

Abstract

Multilateral trade agreements generally require protracted and complicated negotiations. An obvious alternative is unilateral trade liberalization. However, would this simpler route toward free trade improve a country's welfare? This article, the first in a series of two, addresses this question using applied static models of international trade. The second article will examine the issue from the perspective of dynamic models. In the current article, Carlos Zarazaga discusses why static models fail to produce a clear-cut case in favor of unilateral trade liberalization. He points out, however, that static models that find unilateral free trade is harmful owe this negative conclusion to a common assumption-the national product ifferentiation assumption-whose empirical and theoretical foundations have not yet been convincingly substantiated.

Suggested Citation

  • Carlos E. J. M. Zarazaga, 1999. "Measuring the benefits of unilateral trade liberalization, Part I: static models," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 14-25.
  • Handle: RePEc:fip:fedder:y:1999:i:qiii:p:14-25
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    File URL: http://www.dallasfed.org/assets/documents/research/efr/1999/efr9903b.pdf
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    References listed on IDEAS

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    1. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
    2. Robin W. Boadway & John M. Treddenick, 1978. "A General Equilibrium Computation of the Effects of the Canadian Tariff Structure," Canadian Journal of Economics, Canadian Economics Association, vol. 11(3), pages 424-446, August.
    3. Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, vol. 9(3), pages 503-526.
    4. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    5. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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    Cited by:

    1. Cletus C. Coughlin, 2002. "The controversy over free trade: the gap between economists and the general public," Review, Federal Reserve Bank of St. Louis, issue Jan., pages 1-22.

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    Keywords

    Trade;

    Statistics

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