IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Can Bilateral Trade Agreements Help Induce Free Trade?

  • Raymond Riezman

There has been growing debate about whether bilateral trade agreements are damaging multilateral efforts to eliminate barriers to international trade. This paper develops a model in which trading blocs always charge optimal tariffs and make trade agreements based on strategic considerations. We ask a very simple question. Does the fact that trading blocs can form bilateral trade agreements make Free trade less likely to occur? The answer is that it depends on the size distribution of the trading blocs. If there is one large trading bloc along with some smaller ones then bilateral trade agreements allow the smaller trading blocs to coalesce and block the monopoly power of large trading blocs. In this case, bilateral trade agreements facilitate the attainment of free trade. Not allowing customs unions leads to more not less protection. If trading blocs are of roughly equivalent size then bilateral trade agreements allow groups of trading blocs to more effectively monopolize world trade in which case they may make free trade less likely. These results suggest that a policy that inhibits the formation of trading blocs may be harmful. We also compute the welfare effects of trade agreements to get some idea of how empirically important these issues are.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick in its series CSGR Working papers series with number 44/99.

in new window

Date of creation: Oct 1999
Date of revision:
Handle: RePEc:wck:wckewp:44/99
Contact details of provider: Postal: Centre for the Study of Globalisation and Regionalisation (CSGR) University of Warwick Coventry CV4 7AL, U.K.
Phone: +44 (0) 1203 572 533
Fax: +44 (0) 1203 572 548
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Gatsios, Konstantine & Karp, Larry, 1991. "Delegation Games in Customs Unions," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 391-97, April.
  2. John Kennan & Raymond Riezman, 1990. "Optimal Tariff Equilibria with Customs Unions," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 70-83, February.
  3. Jeffrey A. Frankel & Ernesto Stein & Shang-Jin Wei, 1996. "Regional Trading Arrangement: Natural or Super-Natural?," NBER Working Papers 5431, National Bureau of Economic Research, Inc.
  4. Harold L. Cole & Maurice Obstfeld, 1989. "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?," NBER Working Papers 3027, National Bureau of Economic Research, Inc.
  5. Jon D. Haveman, 1996. "Some Welfare Effects of Sequential Customs Union Formation," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 941-58, November.
  6. Kowalczyk, Carsten & Sjostrom, Tomas, 1994. "Bringing GATT into the Core," Economica, London School of Economics and Political Science, vol. 61(243), pages 301-17, August.
  7. Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc.
  8. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
  9. Lawrence H. Summers, 1991. "Regionalism and the world trading system," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 295-301.
  10. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
  11. Haverman, J.D., 1993. "Some Welfare Effects of Dynamic Customs Union Formation," Papers 93-109, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wck:wckewp:44/99. 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: (Thomas Krichel)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.