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Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach

  • Pravin Krishna
  • Devashish Mitra

Using the menu-auction approach to endogenous determination of tariffs and allowing additionally for lobby formation itself to be endogenous, this paper analyzes the impact of unilateral trade liberalization by one country on its partner's trade policies. We find that such unilateral liberalization may induce reciprocal tariff reductions by the partner country. Intuitively, unilateral liberalization by one country has the effect of increasing the incentives for the export lobby in the partner country to form and to lobby effectively against the import-competing lobby there for lower protection.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9631.

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Date of creation: Apr 2003
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Publication status: published as Krishna, Pravin and Devashish Mitra. "Reciprocated Unilateralism In Trade Policy," Journal of International Economics 65(2) 461-487, March 2005
Handle: RePEc:nbr:nberwo:9631
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