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The Politics of Free Trade Agreements

  • Gene M. Grossman
  • Elhanan Helpman

Suppose that an opportunity arises for two countries to negotiate a free trade agreement (FTA). Will an FTA between these countries be politically viable? And if so, what form will it take? We address these questions using a political-economy framework that emphasizes the interaction between industry special interest groups and an incumbent government. We describe the economic conditions necessary for an FTA to be an equilibrium outcome, both for the case when the agreement must cover all bilateral trade and when a few, politically sensitive sectors can be excluded from the agreement.

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File URL: http://www.nber.org/papers/w4597.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4597.

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Date of creation: Dec 1993
Date of revision:
Publication status: published as American Economic Review, vol. 85, 1995, pp. 667-690
Handle: RePEc:nbr:nberwo:4597
Note: ITI
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  1. Grossman, G.M. & Helpman, E., 1993. "Trade Wars and Trade Talks," Papers 1-93, Tel Aviv.
  2. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  3. repec:cup:cbooks:9780521282437 is not listed on IDEAS
  4. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
  5. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
  6. Anne O. Krueger, 1993. "Free Trade Agreements as Protectionist Devices: Rules of Origin," NBER Working Papers 4352, National Bureau of Economic Research, Inc.
  7. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
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