IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/447.html
   My bibliography  Save this paper

Trade negotiations when market access matters

Author

Listed:
  • Monika Mrazova

Abstract

This paper analyses GATT/WTO trade negotiations in an oligopolistic multi-country setting and identifies a new rationale for trade agreements. When set unilaterally, tariffs are inefficiently high, both for familiar terms-of-trade reasons, but also to restrict market access of foreign firms. Trade agreements neutralise both the terms-of-trade and the market-access externalities and help countries reach efficient tariff levels. The paper further studies various kinds of asymmetries in trade negotiations. It is shown that the multilateral negotiations system can sustain only a certain level of free-riding which suggests why multilateralism was successful in the past, but is currently stalling.

Suggested Citation

  • Monika Mrazova, 2009. "Trade negotiations when market access matters," Economics Series Working Papers 447, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:447
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:5b405a02-fab9-4eba-b186-1f1c609cdd2c
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Richard E. Baldwin & Frederic Robert-Nicoud, 2000. "Free trade agreements without delocation," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 766-786, August.
    2. J. Peter Neary, 1998. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High‐Technology Industries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 187-206, March.
    3. Joseph Francois & Will Martin, 2003. "Formula Approaches for Market Access Negotiations," The World Economy, Wiley Blackwell, vol. 26(1), pages 1-28, January.
    4. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    5. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
    6. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
    7. Pravin Krishna, 1998. "Regionalism and Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 227-251.
    8. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    9. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    10. Freund, Caroline, 2000. "Multilateralism and the endogenous formation of preferential trade agreements," Journal of International Economics, Elsevier, vol. 52(2), pages 359-376, December.
    11. Ethier, Wilfred J., 2007. "The theory of trade policy and trade agreements: A critique," European Journal of Political Economy, Elsevier, vol. 23(3), pages 605-623, September.
    12. Kyle Bagwell & Robert W. Staiger, 2011. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization," American Economic Review, American Economic Association, vol. 101(4), pages 1238-1273, June.
    13. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
    14. Kyle Bagwell & Robert W. Staiger, 2001. "Strategic Trade, Competitive Industries and Agricultural Trade Disputes," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 113-128, July.
    15. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
    16. Wilfred J. Ethier, 2004. "Political Externalities, Nondiscrimination, and a Multilateral World," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 303-320, August.
    17. Fujiwara, Kenji, 2008. "A decomposition of gains from trade in a differentiated oligopoly," Japan and the World Economy, Elsevier, vol. 20(3), pages 326-337, August.
    18. Michael Tomz & Judith L. Goldstein & Douglas Rivers, 2007. "Do We Really Know That the WTO Increases Trade? Comment," American Economic Review, American Economic Association, vol. 97(5), pages 2005-2018, December.
    19. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
    20. Harry G. Johnson, 1953. "Optimum Tariffs and Retaliation," Review of Economic Studies, Oxford University Press, vol. 21(2), pages 142-153.
    21. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    22. Furusawa, Taiji & Konishi, Hideo, 2004. "A welfare decomposition in quasi-linear economies," Economics Letters, Elsevier, vol. 85(1), pages 29-34, October.
    23. Donald H. Regan, 2006. "What Are Trade Agreements For? -- Two Conflicting Stories Told by Economists, With a Lesson for Lawyers," Journal of International Economic Law, Oxford University Press, vol. 9(4), pages 951-988, December.
    24. Irwin, Douglas A, 1995. "The GATT in Historical Perspective," American Economic Review, American Economic Association, vol. 85(2), pages 323-328, May.
    25. Kyle Bagwell & Robert W. Staiger, 2012. "Profit Shifting And Trade Agreements In Imperfectly Competitive Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1067-1104, November.
    26. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644, Elsevier.
    27. Paul Krugman, 1992. "Does the New Trade Theory Require a New Trade Policy?," The World Economy, Wiley Blackwell, vol. 15(4), pages 423-442, July.
    28. J. Peter Neary, 2009. "Putting the “New” into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 217-250, June.
    29. Andrew K. Rose, 2007. "Do We Really Know That the WTO Increases Trade? Reply," American Economic Review, American Economic Association, vol. 97(5), pages 2019-2025, December.
    30. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
    31. Christian Broda & Nuno Limao & David E. Weinstein, 2008. "Optimal Tariffs and Market Power: The Evidence," American Economic Review, American Economic Association, vol. 98(5), pages 2032-2065, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Albornoz, Facundo & Calvo Pardo, Héctor F. & Corcos, Gregory & Ornelas, Emanuel, 2012. "Sequential exporting," Journal of International Economics, Elsevier, vol. 88(1), pages 17-31.
    2. Soegaard, Christian, 2013. "An Oligopolistic Theory of Regional Trade Agreements," The Warwick Economics Research Paper Series (TWERPS) 1007, University of Warwick, Department of Economics.
    3. Kyle Bagwell & Robert W. Staiger, 2009. "The WTO: Theory and Practice," NBER Working Papers 15445, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    2. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    3. Ralph Ossa, 2011. "A "New Trade" Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122-152.
    4. Bagwell, Kyle & Staiger, Robert W., 2009. "The WTO: Theory and practice," WTO Staff Working Papers ERSD-2009-11, World Trade Organization (WTO), Economic Research and Statistics Division.
    5. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    6. Gawande, Kishore & Hoekman, Bernard & Cui, Yue, 2011. "Determinants of trade policy responses to the 2008 financial crisis," Policy Research Working Paper Series 5862, The World Bank.
    7. Tarlok Singh, 2010. "Does International Trade Cause Economic Growth? A Survey," The World Economy, Wiley Blackwell, vol. 33(11), pages 1517-1564, November.
    8. Martín Tobal, 2017. "Regulatory Entry Barriers, Rent Shifting and the Home Market Effect," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 76-97, February.
    9. Eicher, Theo S. & Henn, Christian, 2011. "In search of WTO trade effects: Preferential trade agreements promote trade strongly, but unevenly," Journal of International Economics, Elsevier, vol. 83(2), pages 137-153, March.
    10. Bagwell,K. & Staiger,R.W., 2000. "GATT-think," Working papers 19, Wisconsin Madison - Social Systems.
    11. Grossman, Gene, 2016. "The Purpose of Trade Agreements," CEPR Discussion Papers 11151, C.E.P.R. Discussion Papers.
    12. Bown, Chad P. & Crowley, Meredith A., 2014. "Emerging economies, trade policy, and macroeconomic shocks," Journal of Development Economics, Elsevier, vol. 111(C), pages 261-273.
    13. Javorcik, Beata S. & Narciso, Gaia, 2017. "WTO accession and tariff evasion," Journal of Development Economics, Elsevier, vol. 125(C), pages 59-71.
    14. Kyle Bagwell & Robert W. Staiger, 2012. "Profit Shifting And Trade Agreements In Imperfectly Competitive Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1067-1104, November.
    15. Tang, Man-Keung & Wei, Shang-Jin, 2009. "The value of making commitments externally: Evidence from WTO accessions," Journal of International Economics, Elsevier, vol. 78(2), pages 216-229, July.
    16. Groppo, Valeria & Piermartini, Roberta, 2014. "Trade policy uncertainty and the WTO," WTO Staff Working Papers ERSD-2014-23, World Trade Organization (WTO), Economic Research and Statistics Division.
    17. Abu-Bader Suleiman & Abu-Qarn Aamer S, 2008. "The Relationship between GATT Membership and Structural Breaks in International Trade," Global Economy Journal, De Gruyter, vol. 8(4), pages 1-16, December.
    18. Kamal Saggi & Faruk Sengul, 2018. "On the emergence of an MFN club: equal treatment in an unequal world," World Scientific Book Chapters, in: Kamal Saggi (ed.), Economic Analysis of the Rules and Regulations of the World Trade Organization, chapter 4, pages 76-108, World Scientific Publishing Co. Pte. Ltd..
    19. Rolf J. Langhammer, 2010. "Unordnung in der internationalen Handelsordnung: Befunde, Gründe, Auswirkungen und Therapien," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(1), pages 75-98, February.

    More about this item

    Keywords

    Trade negotiations; Trade liberalization; GATT/WTO; Multilateralism;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:447. 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: . General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Pouliquen The email address of this maintainer does not seem to be valid anymore. Please ask Anne Pouliquen to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.