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Globalization's Bystanders: Does Trade Liberalization Hurt Countries that Do Not Participate?

  • Deardorff, Alan V.
  • Stern, Robert M.

This paper uses trade theory to examine the effects of trade liberalization on countries that do not participate in it. These include both countries that fail to participate in multilateral trade negotiations, and also countries that lie outside of preferential trading arrangements such as free trade areas. The analysis suggests that, while it is theoretically possible for excluded countries to gain, through improved terms of trade, from trade liberalization, several reasons suggest that they are more likely to lose.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2005/rp2005-35.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number RP2005/35.

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Length: 16 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:unu:wpaper:rp2005-35
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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  2. Baldwin, Richard E, 1992. "Measurable Dynamic Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 162-74, February.
  3. Ronald Findlay & Stanislaw Wellisz, 1982. "Endogenous Tariffs, the Political Economy of Trade Restrictions, and Welfare," NBER Chapters, in: Import Competition and Response, pages 223-244 National Bureau of Economic Research, Inc.
  4. Richardson, Martin, 1995. "Tariff revenue competition in a free trade area," European Economic Review, Elsevier, vol. 39(7), pages 1429-1437, August.
  5. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
  6. Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
  7. Chang, Won & Winters, L. Alan, 1999. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," CEPR Discussion Papers 2179, C.E.P.R. Discussion Papers.
  8. Brown, Drusilla K. & Kiyota, Kozo & Stern, Robert M., 2005. "Computational analysis of the Free Trade Area of the Americas (FTAA)," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 153-185, August.
  9. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
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