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Exchanging market access at the outsiders' expense: the case of customs unions

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  • Emanuel Ornelas

Abstract

. Under a customs union, countries can exchange preferential market access by coordinating external tariffs to shift profits from excluded countries. I show that the exporting rents resulting from this coordination can offset trade diversion losses produced by the union, even if its members are relatively small in world markets. Such gains come, however, at the expense of excluded countries. I show that small countries can use customs unions also to foster multilateral cooperation, by increasing the incentives of excluded countries to support global free trade. le cas des unions douanières. Dans le cas d'une union douanière, les pays peuvent marchander l'accès préférentiel à un marché en coordonnant leurs tarifs externes de manière à extraire des profits des pays exclus. On montre que les rentes à l'exportation qui résultent de cette coordination peuvent compenser les pertes attribuables à la diversion du commerce qui découle de l'union douanière, même si ses membres sont relativement de petite taille dans les marchés mondiaux. De tels gains se font cependant aux dépens des pays exclus. On montre que les petits pays peuvent utiliser les unions douanières pour stimuler la coopération multilatérale, en accroissant les incitations des pays exclus à poursuivre des stratégies de libre échange global.

Suggested Citation

  • Emanuel Ornelas, 2007. "Exchanging market access at the outsiders' expense: the case of customs unions," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 207-224, February.
  • Handle: RePEc:wly:canjec:v:40:y:2007:i:1:p:207-224
    DOI: 10.1111/j.1365-2966.2007.00405.x
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    More about this item

    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

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