Trade Liberalization and Trade Adjustment Assistance
We explore the relationship between trade adjustment subsidies and successful reciprocal trade liberalization. We consider economies that are faced with a periodic need to move resources out of a declining import-competing sector, and that are attempting to sustain cooperative but self-enforcing trade agreements in the face of these adjustment needs. If the limitations associated with enforcement of international trade agreements are sufficiently severe, trade adjustment assistance can facilitate reciprocal trade liberalization. We argue that this suggests a possible efficiency rationale for adjustment policies that treat resources differently when traded sectors are involved.
|Date of creation:||Sep 1994|
|Date of revision:|
|Publication status:||published as The New Transatlantic Economy, Canzoneri, M., W. Ethier and V. Grilli,eds., Cambridge: Cambridge University Press, 1996.|
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