IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/2009-041.html
   My bibliography  Save this paper

Cross-border lobbying in preferential trading agreements: implications for external tariffs

Author

Listed:
  • Subhayu Bandyopadhyay
  • Sajal Lahiri
  • Howard J. Wall

Abstract

This paper examines the effect of cross-border lobbying on domestic lobbying and on external tariffs in both Customs Union (CU) and Free Trade Area (FTA). We do so by developing a two-stage game which endogenizes the tariff formation function in a political economic model of the directly unproductive rent-seeking activities type. We find that cross-border lobbying unambiguously increases both domestic lobbying and the equilibrium common external tariffs in a CU. The same result also holds for FTA provided tariffs for the member governments are strategic complements. We also develop a specific oligopolistic model of FTA and show that tariffs are indeed strategic complements in such a model.

Suggested Citation

  • Subhayu Bandyopadhyay & Sajal Lahiri & Howard J. Wall, 2009. "Cross-border lobbying in preferential trading agreements: implications for external tariffs," Working Papers 2009-041, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2009-041
    as

    Download full text from publisher

    File URL: http://research.stlouisfed.org/wp/2009/2009-041.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bagwell, Kyle & Staiger, Robert W, 1997. "Multilateral Tariff Cooperation during the Formation of Free Trade Areas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 291-319, May.
    2. 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..
    3. Stoyanov, Andrey, 2009. "Trade policy of a free trade agreement in the presence of foreign lobbying," Journal of International Economics, Elsevier, vol. 77(1), pages 37-49, February.
    4. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    5. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-1187, December.
    6. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    7. Bandyopadhyay, Subhayu & Wall, Howard J, 1999. "Customs Union or Free Trade Area? The Role of Political Asymmetries," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 665-672, November.
    8. Pascalis Raimondos & Alan D. Woodland, 2004. "Non-Preferential Trading Clubs," CESifo Working Paper Series 1145, CESifo Group Munich.
    9. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    10. Martin Richardson, 1994. "Customs Unions and Domestic Taxes," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 537-550, August.
    11. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
    12. Gatsios, Konstantine & Karp, Larry, 1995. "Delegation in a general equilibrium model of customs unions," European Economic Review, Elsevier, vol. 39(2), pages 319-333, February.
    13. Raymond RIEZMAN, 2013. "A 3 × 3 Model of Customs Unions," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 1, pages 7-20 World Scientific Publishing Co. Pte. Ltd..
    14. Bagwell, Kyle & Staiger, Robert W, 1998. "Will Preferential Agreements Undermine the Multilateral Trading System?," Economic Journal, Royal Economic Society, vol. 108(449), pages 1162-1182, July.
    15. 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..
    16. Richardson, Martin, 1995. "Tariff revenue competition in a free trade area," European Economic Review, Elsevier, vol. 39(7), pages 1429-1437, August.
    17. repec:wsi:wschap:9789813233058_0006 is not listed on IDEAS
    18. Konstantine Gatsios & Larry Karp, 1991. "Delegation Games in Customs Unions," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 391-397.
    19. 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 635-657, August.
    20. Raimondos-Moller, Pascalis & Woodland, Alan D., 2006. "Non-preferential trading clubs," Journal of International Economics, Elsevier, vol. 68(1), pages 79-91, January.
    21. Melatos, Mark & Woodland, Alan, 2007. "Endogenous trade bloc formation in an asymmetric world," European Economic Review, Elsevier, vol. 51(4), pages 901-924, May.
    22. Panagariya, Arvind & Findlay, Ronald & DEC, 1994. "A political - economy analysis of free trade areas and customs unions," Policy Research Working Paper Series 1261, The World Bank.
    23. Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
    24. Kamal Saggi, 2018. "Preferential Trade Agreements And Multilateral Tariff Cooperation," World Scientific Book Chapters,in: Economic Analysis of the Rules and Regulations of the World Trade Organization, chapter 6, pages 127-155 World Scientific Publishing Co. Pte. Ltd..
    25. Kishore Gawande & Pravin Krishna & Michael J. Robbins, 2006. "Foreign Lobbies and U.S. Trade Policy," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 563-571, August.
    26. Ronald Findlay & Stanislaw Wellisz, 1982. "Endogenous Tariffs, the Political Economy of Trade Restrictions, and Welfare," NBER Chapters,in: Import Competition and Response, pages 223-244 National Bureau of Economic Research, Inc.
    27. Bhagwati, Jagdish & Greenaway, David & Panagariya, Arvind, 1998. "Trading Preferentially: Theory and Policy," Economic Journal, Royal Economic Society, vol. 108(449), pages 1128-1148, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Free trade ; Tariff;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2009-041. 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: (Anna Oates). General contact details of provider: http://edirc.repec.org/data/frbslus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.