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Preferential Trade Agreements And Multilateral Tariff Cooperation

In: Economic Analysis of the Rules and Regulations of the World Trade Organization




Are preferential trade agreements (PTAs) building or stumbling blocks for multilateral trade liberalization? I address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly. The central result is that when countries are symmetric, a free trade agreement (FTA) undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union (CU) does so via its effect on the cooperation incentives of members. However, when countries are asymmetric with respect to either market size or cost, there exist circumstances where PTAs facilitate multilateral tariff cooperation.

Suggested Citation

  • Kamal Saggi, 2018. "Preferential Trade Agreements And Multilateral Tariff Cooperation," World Scientific Book Chapters, in: Kamal Saggi (ed.), Economic Analysis of the Rules and Regulations of the World Trade Organization, chapter 6, pages 127-155, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789813233058_0006

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    Multilateral Trading System; Trade Agreements; Trade Liberalization; International Tariff Cooperation; WTO Disputes; Case Studies;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations


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