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Contesting an International Trade Agreement

Author

Listed:
  • Matthew T. Cole

    () (Department of Economics, California Polytechnic State University)

  • James Lake

    () (Department of Economics, Southern Methodist University)

  • Ben Zissimos

    () (Department of Economics, University of Exeter)

Abstract

After governments sign an international trade agreement (TA), each government must ratify the TA. Often, this ratification process is lengthy and the outcome highly uncertain. We model a two-country TA where, unlike prior literature, pro-trade and anti-trade interest groups in each country recognize that (i) TA implementation requires ratification by both governments and (ii) they cannot condition contributions on their government's ratification decision. In this new class of contests, which we call 'parallel contests', we show that (i) anti- and pro-trade lobbies lobby in equilibrium, (ii) the probability of TA ratification lends itself to intuitive and tractable comparative statics, and (iii) the protection embodied in negotiated TA tariffs reflects a tension between the liberalizing force of lobbying and inherently protectionist government preferences.

Suggested Citation

  • Matthew T. Cole & James Lake & Ben Zissimos, 2017. "Contesting an International Trade Agreement," Working Papers 1703, California Polytechnic State University, Department of Economics.
  • Handle: RePEc:cpl:wpaper:1703
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    More about this item

    Keywords

    Contests; Trade Agreements; Lobbying;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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