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Reciprocal Trade Liberalization

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  • Kyle Bagwell
  • Robert W. Staiger

Abstract

Why have governments found reciprocal trade agreements such as GATT to be a more effective means of facilitating trade liberalization than unilateral initiatives? We provide in this paper an analytic framework for the study of reciprocal trade agreements. We use this framework to establish three main results. First, we argue that political-economy factors are important for explaining the range of trade policies observed, but that these factors can not explain why governments seek reciprocal trade agreements as an institutional form for implementing their preferred policies. Rather, whether or not governments are politically motivated, Johnson (1953-54) was right: The central purpose of a reciprocal trade agreement is to eliminate the terms-of-trade driven policies that arise in the absence of such an agreement. Second, we establish an economic interpretation of the principles of reciprocity and nondiscrimination that represent the foundation of postwar reciprocal trade agreements. Finally, we offer new insights regarding the treatment of export subsidies in reciprocal trade agreements.

Suggested Citation

  • Kyle Bagwell & Robert W. Staiger, 1996. "Reciprocal Trade Liberalization," Discussion Papers 1150, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:1150
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    References listed on IDEAS

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    14. Chari, V V & Kehoe, Patrick J, 1990. "International Coordination of Fiscal Policy in Limiting Economies," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 617-636, June.
    15. Deardorff, Alan V., 1996. "International externalities in the use of pollution policies," International Review of Law and Economics, Elsevier, vol. 16(1), pages 53-59, March.
    16. Bagwell, Kyle & Staiger, Robert W, 1990. "A Theory of Managed Trade," American Economic Review, American Economic Association, pages 779-795.
    17. Bagwell, Kyle & Staiger, Robert W, 1990. "A Theory of Managed Trade," American Economic Review, American Economic Association, pages 779-795.
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    Cited by:

    1. Jee-Hyeong Park, 2000. "Sustaining Free Trade with Imperfect Private Information about Non-Tariff Barriers," Econometric Society World Congress 2000 Contributed Papers 1036, Econometric Society.
    2. Eromenko, Igor, 2010. "Accession to the WTO. Computable General Equilibrium Analysis: the Case of Ukraine. Part I," MPRA Paper 67476, University Library of Munich, Germany.
    3. Furusawa, Taiji, 1999. "The negotiation of sustainable tariffs," Journal of International Economics, Elsevier, pages 321-345.
    4. Bagwell, Kyle & Staiger, Robert W., 1997. "Strategic export subsidies and reciprocal trade agreements: The natural monopoly case," Japan and the World Economy, Elsevier, pages 491-510.
    5. Kyle Bagwell & Robert W. Staiger, 1997. "Regionalism and Multilateral Tariff Cooperation," NBER Working Papers 5921, National Bureau of Economic Research, Inc.
    6. Kolev, Dobrin R. & Prusa, Thomas J., 1999. "Tariff policy for a monopolist in a signaling game," Journal of International Economics, Elsevier, pages 51-76.
    7. Bagwell, Kyle & Staiger, Robert W., 2001. "Reciprocity, non-discrimination and preferential agreements in the multilateral trading system," European Journal of Political Economy, Elsevier, vol. 17(2), pages 281-325, June.
    8. Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, pages 1214-1245.
    9. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, pages 215-248.
    10. Dobrin R. Kolev & Thomas J. Prusa, 1997. "Tariff Policy for a Monopolist Under Incomplete Information," NBER Working Papers 6090, National Bureau of Economic Research, Inc.
    11. Zissimos, Ben, 2007. "The GATT and gradualism," Journal of International Economics, Elsevier, pages 410-433.
    12. Bagwell, Kyle & Staiger, Robert W., 1997. "Multilateral tariff cooperation during the formation of customs unions," Journal of International Economics, Elsevier, pages 91-123.
    13. Bagwell Kyle & Staiger Robert W., 2003. "Protection and the Business Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-45.
    14. Mattoo, Aaditya, 1999. "Financial services and the World Trade Organization - liberalization commitments of the developing and transition economies," Policy Research Working Paper Series 2184, The World Bank.
    15. Low, Patrick & Mattoo, Aaditya, 1998. "Reform in basic telecommunications and the WTO negotiations: The Asian experience," WTO Staff Working Papers ERAD-98-01, World Trade Organization (WTO), Economic Research and Statistics Division.
    16. Kyle Bagwell & Robert W. Staiger, 1995. "Protection and the Business Cycle," Discussion Papers 1130, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    17. Bagwell,K. & Staiger,R.W., 1998. "The simple economics of labor standards and the Gatt," Working papers 9, Wisconsin Madison - Social Systems.
    18. Andrew T. Ching, 2010. "A Dynamic Oligopoly Structural Model For The Prescription Drug Market After Patent Expiration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1175-1207, November.
    19. Mattoo, Aaditya, 1998. "Financial services and the WTO: Liberalization in the developing and transition economies," WTO Staff Working Papers TISD-98-03, World Trade Organization (WTO), Economic Research and Statistics Division.
    20. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, and International Economic Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 519-562.
    21. Paolo Epifani & Juliette Vitaloni, 2006. ""GATT-think" with Asymmetric Countries," Review of International Economics, Wiley Blackwell, pages 427-444.
    22. Bagwell Kyle & Staiger Robert W., 2003. "Protection and the Business Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-45.
    23. Bagwell, Kyle & Staiger, Robert W., 1997. "Strategic export subsidies and reciprocal trade agreements: The natural monopoly case," Japan and the World Economy, Elsevier, pages 491-510.
    24. Eromenko, Igor, 2011. "Accession to the WTO. Computable General Equilibrium Analysis: the Case of Ukraine," MPRA Paper 67535, University Library of Munich, Germany.
    25. Maggi, Giovanni & Rodriguez-Clare, Andres, 2000. "Import penetration and the politics of trade protection," Journal of International Economics, Elsevier, pages 287-304.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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