Multilateral Tariff Cooperation During the Formation of Free Trade Areas
We explore the impact of the formation of regional free trade agreements on the ability of countries to maintain low cooperative multilateral tariffs. We assume that countries can not make binding international commitments, but are instead limited to self-enforcing arrangements. Specifically, we model cooperation in multilateral trade policy as involving a constant balance between, on the one hand, the gains from deviating unilaterally from an agreed-upon trade policy, and on the other, the discounted expected future benefits of maintaining multilateral cooperation, with the understanding that the latter would be forfeited in the trade war which followed a unilateral defection in pursuit of the former. In this context, we explore the way in which the formation of regional free trade agreements upsets the balance between current and future conditions, and trace through the dynamic ramifications of these effects for multilateral cooperation. Our results suggest that the emergence of regional free trade areas will be accompanied by a temporary retreat from liberal multilateral trade policies. Eventually, however, as the full impact of the emerging free trade agreement on multilateral trade patterns is felt, the initial balance between current and expected furture conditions tends to reemerge, and liberal multilateral trade policies can be restored.
|Date of creation:||May 1993|
|Date of revision:|
|Contact details of provider:|| Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014|
Web page: http://www.kellogg.northwestern.edu/research/math/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bond, E.W. & Syropoulos, C., 1993.
"Optimality and Stability of Regional Trading Blocs,"
5-93-2, Pennsylvania State - Department of Economics.
- Bond, E.W. & Syropoulos, C., 1993. "Optimality and Stability of Regional Trading Blocs," Discussion Papers 93-11, Department of Economics, University of Birmingham.
- Raymond RIEZMAN, 2013.
"Customs Unions and the Core,"
World Scientific Book Chapters,
in: International Trade Agreements and Political Economy, chapter 3, pages 33-43
World Scientific Publishing Co. Pte. Ltd..
- Kyle Bagwell & Robert W. Staiger, 1989.
"A Theory of Managed Trade,"
801, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bagwell, Kyle & Staiger, Robert, 1994.
"Multilateral Tariff Cooperation During the Formation of Customs Unions,"
CEPR Discussion Papers
962, C.E.P.R. Discussion Papers.
- Bagwell, Kyle & Staiger, Robert W., 1997. "Multilateral tariff cooperation during the formation of customs unions," Journal of International Economics, Elsevier, vol. 42(1-2), pages 91-123, February.
- Kyle Bagwell & Robert Staiger, 1994. "Multilateral Tariff Cooperation During the Formation of Customs Unions," International Trade 9410002, EconWPA.
- Kyle Bagwell & Robert W. Staiger, 1993. "Multilateral Tariff Cooperation during the Formation of Customs Unions," NBER Working Papers 4543, National Bureau of Economic Research, Inc.
- Bagwell, K. & Staiger, R.W., 1994. "Multilateral Tariff Cooperation During the Formation of Customs Unions," Working papers 9404, Wisconsin Madison - Social Systems.
- Kyle Bagwell & Robert W. Staiger, 1993. "Miltilateral Tariff Cooperation During the Formation of Customs Unions," Discussion Papers 1070, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Paul R. Krugman, 1991.
"The move toward free trade zones,"
Federal Reserve Bank of Kansas City, issue Nov, pages 5-25.
- Paul R. Krugman, 1991. "The move toward free trade zones," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-58.
- Kowalczyk, Carsten & Sjostrom, Tomas, 1994.
"Bringing GATT into the Core,"
London School of Economics and Political Science, vol. 61(243), pages 301-17, August.
- Rodney D. Ludema, 1998. "On the Value of Preferential Trade Agreements in Multilateral Negotiations," International Trade 9802003, EconWPA.
- Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
- Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc.
- Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:1048. 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: (Fran Walker)
If references are entirely missing, you can add them using this form.