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Customs Unions and Comparative Advantage

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  • Syropoulos, Constantinos

Abstract

This paper constructs a simple, general equilibrium trade model to investigate how the formation of unconstrained, GATT-constrained, and Kemp-Wan customs unions affects interbloc tariffs and welfare. A central point of the paper is that the liberalization of intraunion trade creates incentives for all parties to reduce their remaining tariffs. Despite this, regional integration may not benefit nonmember countries and, depending on trade patterns and comparative advantage, it may raise welfare of members more than a regime of globally free trade. Copyright 1999 by Royal Economic Society.

Suggested Citation

  • Syropoulos, Constantinos, 1999. "Customs Unions and Comparative Advantage," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 239-266, April.
  • Handle: RePEc:oup:oxecpp:v:51:y:1999:i:2:p:239-66
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    References listed on IDEAS

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    1. Peter Kooreman & Arie Kapteyn, 1990. "On the Empirical Implementation of Some Game Theoretic Models of Household Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 584-598.
    2. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, January.
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    Cited by:

    1. Facchini, Giovanni & Silva, Peri & Willmann, Gerald, 2013. "The customs union issue: Why do we observe so few of them?," Journal of International Economics, Elsevier, pages 136-147.
    2. Chad P. Bown & Patricia Tovar, 2016. "Preferential Liberalization, Antidumping, and Safeguards: Stumbling Block Evidence from MERCOSUR," Economics and Politics, Wiley Blackwell, vol. 28(3), pages 262-294, November.
    3. Eric Bond, 2009. "Paths of efficient self-enforcing trade agreements," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 85-104, October.
    4. David Vines & Monika Mrazova, 2008. "Is the WTO's Article XXIV Bad?," Economics Series Working Papers 417, University of Oxford, Department of Economics.
    5. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Toward Nonmembers?," The Quarterly Journal of Economics, Oxford University Press, vol. 123(4), pages 1531-1575.
    6. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, pages 1125-1231.
    7. Constantinos Syropoulos, 2002. "On Tariff Preferences And Delegation Decisions In Customs Unions: A Heckscher--Ohlin Approach," Economic Journal, Royal Economic Society, vol. 112(481), pages 625-648, July.
    8. 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..
    9. Melatos, Mark & Woodland, Alan, 2007. "Endogenous trade bloc formation in an asymmetric world," European Economic Review, Elsevier, vol. 51(4), pages 901-924, May.
    10. Bond, Eric W. & Syropoulos, Constantinos & Winters, L. Alan, 2001. "Deepening of regional integration and multilateral trade agreements," Journal of International Economics, Elsevier, pages 335-361.
    11. 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.
    12. Syropoulos, Constantinos, 2003. "Rules for the disposition of tariff revenues and the determination of common external tariffs in customs unions," Journal of International Economics, Elsevier, vol. 60(2), pages 387-416, August.
    13. repec:spr:grdene:v:19:y:2010:i:3:d:10.1007_s10726-009-9161-2 is not listed on IDEAS
    14. Chang, Yang-Ming & Xiao, Renfeng, 2015. "Preferential trade agreements between asymmetric countries: Free trade areas (with rules of origin) vs. customs unions," Japan and the World Economy, Elsevier, vol. 33(C), pages 28-43.
    15. 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.
    16. Lisandro Abrego & Raymond Riezman & John Whalley, 2001. "How Reasonable Are Assumptions Used in Theoretical Models?: Computational Evidence on the Likelihood of Trade Pattern Changes," NBER Working Papers 8169, National Bureau of Economic Research, Inc.
    17. Mette Ersbak Bang Nielsen, 2006. "The endogenous formation of sustanaible trade agreements," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, June.
    18. László Á. Kóczy, 2010. "Strategic Aspects of the 1995 and 2004 EU Enlargements," Group Decision and Negotiation, Springer, pages 267-277.
    19. 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..
    20. Theo S. Eicher & Christian Henn & Chris Papageorgiou, 2012. "Trade creation and diversion revisited: Accounting for model uncertainty and natural trading partner effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(2), pages 296-321, March.

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