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Multilateral Versus Regional Trading Arrangements: Substitutes Or Compliments?

  • Richard Lipsey

    ()

    (Simon Fraser University)

  • Murray Smith

    ()

We summarise salient developments in the interaction of the multilateral trading system and multilateral trading agreements (MTAs) on the one hand and regional trading agreements (RTAs) on the other. We then consider the economic effects of RTAs, comparing customs unions with free trade agreements. We argue, contrary to much received wisdom, that either may produce more economic benefits than the other, depending on the specific context in which they are introduced. There follows a discussion of the political economy effects of RTAs. Some of these have unfavourable, some neutral and some favourable effects on the progress of further MTAs. We conclude that the case against RTAs as eroding the MTS and inhibiting further MTA negotiations, as expounded by such economists as Krueger and Bhagwati, is not well founded. There remain grounds for optimism that the process of competitive liberalisation in RTAs will lead eventually to further multilateral liberalisation.

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File URL: http://www.sfu.ca/econ-research/RePEc/sfu/sfudps/dp10-03.pdf
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Paper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp10-03.

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Length: 37
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:sfu:sfudps:dp10-03
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  1. Westphal, Larry E, 1990. "Industrial Policy in an Export-Propelled Economy: Lessons from South Korea's Experience," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 41-59, Summer.
  2. James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
  3. Krueger, Anne O., 1997. "Free trade agreements versus customs unions," Journal of Development Economics, Elsevier, vol. 54(1), pages 169-187, October.
  4. Carlaw, Kenneth I. & Lipsey, Richard G., 2002. "Externalities, technological complementarities and sustained economic growth," Research Policy, Elsevier, vol. 31(8-9), pages 1305-1315, December.
  5. Richard Baldwin, 2006. "Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade," NBER Working Papers 12545, National Bureau of Economic Research, Inc.
  6. Ethier, Wilfred J, 1998. "The New Regionalism," Economic Journal, Royal Economic Society, vol. 108(449), pages 1149-61, July.
  7. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  8. Feenstra, R.C., 1995. "Estimating the Effects of Trade Policy," Papers 95-10, California Davis - Institute of Governmental Affairs.
  9. Daniel Trefler, 2006. "The long and short of the Canada-U.S. free trade agreement," LSE Research Online Documents on Economics 6721, London School of Economics and Political Science, LSE Library.
  10. Richard Lipsey, 2007. "Reflections on the general theory of second best at its golden jubilee," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 349-364, August.
  11. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  12. Paul Wonnacott & Ronald J. Wonnacott, 1982. "Free Trade between the United States and Canada: Fifteen Years Later," Canadian Public Policy, University of Toronto Press, vol. 8(s1), pages 412-427, October.
  13. Richard G. Lipsey, 1957. "Mr. Gehrels on Customs Unions," Review of Economic Studies, Oxford University Press, vol. 24(3), pages 211-214.
  14. Bhagwati, Jagdish, 2008. "Termites in the Trading System: How Preferential Agreements Undermine Free Trade," OUP Catalogue, Oxford University Press, number 9780195331653, December.
  15. Lipsey, Richard G. & Carlaw, Kenneth I. & Bekar, Clifford T., 2005. "Economic Transformations: General Purpose Technologies and Long-Term Economic Growth," OUP Catalogue, Oxford University Press, number 9780199290895, December.
  16. Richard G. Harris, 1989. "The New Protectionism Revisited," Working Papers 758, Queen's University, Department of Economics.
  17. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
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