Regional Integration as Diplomacy
Regional integration agreements (RIAs) are examples of second best and have an ambiguous impact on welfare, contend the authors. They build a model in which RIAs unambiguously raise welfare by correcting for externalities. It assumes that trade between neighboring countries increases trust between them and reduces the likelihood of conflict. The optimum intervention in that case is a subsidy on imports from the neighbor. The authors show that an equivalent solution is for the neighboring countries to tax imports fromthe rest of the world -that is, to form an RIA- together with imposing some domestic taxes. In fact, security threats have moved neighboring countries to form RIAs. Examples include the creation of the European Coal and Steel Community (1951) and the European Economic Community (1957) to reduce the threat of war in Europe, as well as various RIAs among developing countries. The authors show, among other things, that: 1) the optimum tariffs on imports from the rest of the world are likely to decline over time; 2) deep integration implies lower optimum external tariffs if it is exogenous; 3) but if deep integration is endogenous, it implies higher optimum external tariffs before it occurs and lower ones thereafter; and 4) enlargement of a bloc (in terms of symmetric countries) has an ambiguous impact on external tariffs but improves welfare, and some form of domino effect exists in the sense that enlargement increases the incentive for nonmembers to seek accession. Although externalities associated with security matters imply that an RIA may maximize welfare, this model suggests that the RIA is a transitory arrangement in the sense that optimum trade preferences are highest at the time the RIA is formed (when security is low) and tend to decline over time. In other words, the RIA's external trade policy becomes increasingly open over time (as well as following deep integration).
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 12 (1998)
Issue (Month): 2 (May)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Phone: (202) 477-1234
Fax: 01865 267 985
Web page: http://wber.oxfordjournals.org/
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marco López-Cerdá & Guillermo Owen & Jos Potters & Carles Raffels & E. Calvo & F. Valenciano & J. Zarzuelo, 1993. "Discussion," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 1(1), pages 36-51, December.
- Cadot, Olivier & de Melo, Jaime & Olarreaga, Marcelo, 1996.
"Regional Integration and Lobbying for Tariffs Against Non-members,"
CEPR Discussion Papers
1448, C.E.P.R. Discussion Papers.
- Cadot, Olivier & de Melo, Jaime & Olarraga, Marcelo, 1999. "Regional Integration and Lobbying for Tariffs against Nonmembers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 635-57, August.
- Cadot, O. & De Melo, J. & Olarreaga, M., 1996. "Regional Integration and Lobbying for Tariffs Against Non-Members," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 96.08, Institut d'Economie et Econométrie, Université de Genève.
- Hirschman, Albert O, 1982. "Rival Interpretations of Market Society: Civilizing, Destructive, or Feeble?," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1463-84, December.
- Hirschman,Albert O., 1981. "Essays in Trespassing," Cambridge Books, Cambridge University Press, number 9780521282437, Junio.
- Steve Chan, 1984. "Mirror, Mirror on the Wall..," Journal of Conflict Resolution, Peace Science Society (International), vol. 28(4), pages 617-648, December.
- repec:fth:geneec:96.07 is not listed on IDEAS
- Smith, Alasdair, 1992. "Measuring the effects of '1992'," Discussion Papers in Economics 07/92, Department of Economics, University of Sussex.
When requesting a correction, please mention this item's handle: RePEc:oup:wbecrv:v:12:y:1998:i:2:p:271-95. 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: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.