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Are global trade negotiations behind a fragmented world of "gated globalization"?

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  • James Lake

    () (Southern Methodist University)

  • Santanu Roy

    () (Southern Methodist University)

Abstract

We show that global trade negotiations can prevent global free trade. In a simple model where global tariff negotiations precede sequential Free Trade Agreement (FTA), we show FTA formation can expand all the way to global free trade in the absence of global tariff negotiations but global free trade never emerges when global tariff negotiations precede FTA formation. This result arises precisely because global tariff negotiations successfully elicit concessions from negotiating countries. Moreover, global tariff negotiations can produce a fragmented world of "gated globalization" where some countries form FTAs eliminating tariff barriers among themselves while outsiders continue facing higher tariffs.

Suggested Citation

  • James Lake & Santanu Roy, 2015. "Are global trade negotiations behind a fragmented world of "gated globalization"?," Departmental Working Papers 1508, Southern Methodist University, Department of Economics.
  • Handle: RePEc:smu:ecowpa:1508
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    References listed on IDEAS

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    Cited by:

    1. Moise Nken & Halis Murat Yildiz, 2017. "Implications of multilateral tariff bindings on the formation of preferential trade agreements and quest for global free trade," Working Papers 068, Ryerson University, Department of Economics.
    2. Matthew T. Cole & James Lake & Ben Zissimos, 2017. "Contesting an International Trade Agreement," Working Papers 1703, California Polytechnic State University, Department of Economics.
    3. James Lake & Moise Nken & Halis Murat Yildiz, 2018. "Tariff Bindings and the Dynamic Formation of Preferential Trade Agreements," Working Papers 072, Ryerson University, Department of Economics.

    More about this item

    Keywords

    Free Trade Agreement; global free trade; multilateralism; tariff complementarity; binding overhang;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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