trade policy of a free trade agreement in the presence of foreign lobbying abstract this paper studies the effect of foreign lobbies on trade policy of a country which is a member of a free trade agreement fta it uses a monopolistically competitive political economy model in which the government determines external tariffs endogenously the effect of foreign lobbying under the fta is examined empirically using canadian industry level trade data that allow differentiating of lobby groups by the country of origin the analysis suggests that the presence of foreign lobbying has a significant effect on the domestic trade policy the heterogeneity of foreign lobbies is also important the presence of an organized lobbying group in an fta partner country tends to raise trade barriers while an organized lobbying group of exporters from outside of the fta is associated with less protection

distributional effects of a carbon tax on car fuels in france this paper analyses the distributional effects of alternative scenarios of carbon taxes on car fuels using disaggregated french panel data from 2003 to 2006 it incorporates household price responsiveness that differs across income groups into a consumer surplus measure of tax burden carbon taxation is regressive before revenue recycling however taking into account the benefits from congestion reduction induced by the tax mitigates regressivity we show also that recycling additional revenues from the carbon tax either in equal amounts to each household or according to household size makes poorest households better off

self enforcing trade agreements and lobbying abstract in an environment where international trade agreements must be enforced via promises of future cooperation the presence of an import competing lobby has important implications for optimal punishments when lobbies work to disrupt trade agreements a nash reversion punishment scheme must balance two conflicting objectives longer punishments help to enforce cooperation by increasing the government s costs of defecting but because the lobby prefers the punishment outcome this also incentivizes lobbying effort and with it political pressure to break the agreement thus the model generates an optimal length for nash reversion punishments and it depends directly on the political influence of the lobbies trade agreement tariffs are shown to be increasing in the political influence of the lobbies as well as their patience levels

policymakers horizon and the sustainability of international cooperation abstract this paper examines the impact of policymakers horizon on the sustainability of international cooperation we describe a prisoners dilemma game between two infinitely lived countries run by policymakers we show that re election incentives can act as a discipline device making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely lived policymakers we also show that when voting suffers from a recency bias policymakers may have incentives to collude to get re elected and term limits may help international cooperation

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

preferential versus multilateral trade liberalization and the role of political economy abstract in this paper we analyze the effect of the freedom to pursue preferential trade liberalization permitted by article xxiv of the gatt on country s incentives to participate in multilateral negotiations and on feasibility of global free trade we present a model in which countries choose whether to participate in preferential or multilateral trade agreements under political pressures from domestic special interest groups we show that heterogeneity in political preferences across countries plays an important role in determining the relative merits of preferential and multilateral approaches to trade liberalization on one hand the opportunity to liberalize preferentially may be necessary to induce countries with strong political motivations to participate in multilateral free trade negotiations on the other hand when countries share similar political preferences multilateral free trade that would have been politically supported otherwise becomes unattainable if countries can pursue preferential liberalization

the mfn clause welfare and multilateral cooperation between countries of unequal size abstract this paper analyzes mfn in a competing exporters model of trade between three countries with unequal endowments and shows that mfn yields higher aggregate welfare than tariff discrimination even as it makes low income countries worse off furthermore in a repeated game of tariff cooperation multilateral free trade is easier to sustain under mfn punishments relative to discriminatory ones this conclusion holds even when tariff discrimination takes the form of bilateral trade agreements overall the analysis shows that from the viewpoint of low income countries mfn and multilateral tariff cooperation are complementary in nature

a theory of managed trade this paper proposes a theory that predicts low levels of protection during periods of normal trade volume coupled with episodes of special protection when trade volumes surge this dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings high trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels therefore as the volume of trade expands the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check copyright 1990 by american economic association

on the core of an economy with differential information abstract we show that the fine core of an atomless exchange economy with differential information is a subset of the ex post core of the economy this inclusion may be proper and it does not hold for economies with a finite number of traders consequently every fine core allocation is a selection from the equilibrium corre spondence of the associated family of full information economies moreover when each trader knows his or her own utility function and his of her own endowment every fine core allocation is a rational expectations equilibrium allocation journal of economic literature classification numbers c72 d50

politically realistic objective functions and trade policy profs and tariffs abstract this paper demonstrates a mathematical correspondence between the deus ex machina tariff formation approach and political economy approach the correspondence implies that the tariff chosen by lobbying influenced policy makers will be equivalent to a tariff chosen by a deus ex machina government that gives too much weight to profits this result allows many political economy issues to be addressed in the simple framework of a deus ex machina government which faces a politically realistic objective function prof

multilateral tariff cooperation during the formation of free trade areas we consider the impact of the formation of free trade agreements on multilateral tariff cooperation we assume that countries are limited to selfenforcing multilateral arrangements that balance the gains from deviating against the costs of an ensuing trade war we find that the emergence of free trade areas will be accompanied by a temporary retreat from liberal multilateral trade policies as the initial balance supporting multilateral cooperation is upset eventually however as the full impact of the emerging free trade agreement on multilateral trade patterns is felt this initial balance tends to reemerge and liberal multilateral trade policies can be restored

do south south preferential trade agreements undermine the prospects for multilateral free trade due to trade diversion there has been concerns expressed over the proliferation of preferential trade agreements ptas between south countries in this paper we compare welfare across the various forms of bilateral free trade agreements ftas and customs unions cus and examine their implications for the stability of multilateral free trade while north north ptas tend to yield higher welfare we fi nd certain cases where south south agreements are more likely to lead to global free trade than north north or north south agreements but other cases where multilateral cooperation over free trade is the least likely under south south agreements we also examine how the expansion of existing agreements or the combination of separate agreements affects the potential for free trade

recurrent trade agreements and the value of external enforcement abstract this paper presents a theory of dynamic trade agreements in which external institutions such as the wto play a central role in supporting credible enforcement in our model countries engage in ongoing negotiations and as a consequence cooperative agreements become unsustainable in the absence of external enforcement institutions by using mechanisms such as delays in dispute resolution and direct penalties enforcement institutions can restore incentives for cooperation despite the lack of coercive power the occurrence of costly trade disputes and the feasibility of mechanisms such as escape clauses depend on the degree to which enforcement institutions can verify and condition on events that may lead to trade disputes

preferential trade agreements and antidumping protection abstract are preferential trade agreements ptas stumbling blocks or building blocks towards multilateral trade liberalization we address this question by investigating the effects of the negotiation and implementation of ptas on the use of antidumping ad i e the most common form of contingent trade protection by member countries against non members as there has been a concurrent surge in regionalism and ad activity since the 1990s theoretically derived empirical predictions are supported by the empirical analysis based on the 15 most intense users of ad the results demonstrate that both the negotiation and the implementation of ptas lead to fewer ad measures against non member countries except for members of customs union agreements in force facing large import surges from non members thus our results highlight a building block effect of ptas on multilateral trade cooperation when it comes to ad protection

can bilateral trade agreements help induce free trade 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

the size of trading blocs market power and world welfare effects abstract we construct an n country n commodity trade model to analyze the implications of bloc size for nash equilibrium tariffs and welfare the relationship between the absolute size of symmetric trading blocs and their market power is ambiguous and we illustrate how this relationship varies with model parameters in contrast sufficiently large increases in the relative size of a bloc enhance its relative market power and cause the welfare of its country members to rise above the free trade level we establish the existence of an optimal bloc size and study the dependence of optimal size on the parameters of the model

the ec and protection the political economy this paper surveys the arguments that the creation of the ec has increased world protectionism relative to what it would otherwise have been models of tariff bargaining between trade blocks suggest some increase because the optimum tariff is higher for larger blocks but this is not inevitable models of ec decision taking suggest an increase because of the restaurant bill problem and the tendency of committees towards universalism the evidence is not enough however to be certain that a protectionist effect exists

insecure resources bilateral trade and endogenous predation a game theoretic analysis of conflict and trade this article analyzes how interstate conflict over resources affects the incentives to trade and how greater trade openness affects the endogenous decisions of arming by enemy countries we identify conditions under which there is trade between two adversary countries and show that each adversary s arming affects domestic welfare in three different ways the first is an export revenue effect which increases welfare because arming causes export revenue to go up i e there is an arming induced terms of trade improvement the second is a resource predation effect which increases welfare because arming increases the appropriation of a rival country s resource input to produce a consumption good the third is an output distortion effect which reduces welfare because arming lowers the domestic production of civilian goods based on these effects we show circumstances in which greater trade openness reduces the intensity of arming we also discuss the implications of resource security asymmetry for conflict and trade

trading rules and the environment does equal treatment lead to a cleaner world abstract in this paper we consider a three stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform most favored nation mfn tariffs on countries choice over environmental standards for varying degrees of pollution spillovers because of the presence of punishment effects and stronger own and cross tariff effects we find that discrimination yields higher standards than mfn and free trade independently of the extent of pollution spillovers when pollution is local and incentives to free ride on other countries abatement efforts are weak we show however that welfare is larger under mfn than under discrimination in a dynamic setting we consider the impact of symmetric and asymmetric treatments on the sustainability of an international environmental agreement iea and obtain that multilateral cooperation is easier to sustain under discrimination than under mfn or free trade

tariff bindings and the dynamic formation of preferential trade agreements abstract we show that multilateral tariff binding liberalization substantially impacts the nature and extent of preferential trade agreement pta formation first it shapes the nature of forces constraining expansion of free trade agreements ftas the constraining force is a free riding incentive of fta non members under relatively high bindings but an exclusion incentive of fta members under relatively low bindings second multilateral tariff binding liberalization shapes the role played by ptas in the attainment of global free trade initially tariff binding liberalization leads to custom union cu formation in equilibrium but in a way that undermines the pursuit of global free trade however further tariff binding liberalization leads to fta formation in equilibrium and in a way that facilitates the attainment of global free trade our theoretical analysis also has implications regarding recent empirical discussions over the relative merits of ftas versus cus

do credible domestic institutions promote credible international agreements we examine the relationship between international policy coordination and domestic policy reputation when both are self sustaining we show that domestic policy commitment does not necessarily facilitate international cooperation rather efficient policies may be most easily sustained when governments are unable to pre commit to policy domestically moreover the lack of domestic commitment is more likely to facilitate international cooperation the larger the international spillovers of domestic policies are

regionalism in a multilateral world recent regional initiatives have been addressed from a vinerian perspective of trade creation and trade diversion this is true of both policy oriented economists who tend to be critical of the initiatives and theorists who have added dynamic and gametheoretic elements to the vinerian structure this paper describes the stylized facts of much recent regional integration and develops an alternative model the analysis suggests that regional integration far from threatening multilateral liberalism may in fact be a direct consequence of the success of past multilateralism and an added guarantee for its survival

a strategic and welfare theoretic analysis of free trade areas abstract we construct a three country model to determine how the formation of free trade areas ftas affects optimal tariffs and welfare we find that at constant rest of the world row tariffs the adoption of internal free trade induces union members to reduce their external tariffs below the kemp wan j int econom 6 1976 95 97 level and causes row s terms of trade to improve and its welfare to rise when row also behaves optimally its policy response to the formation of the fta is to raise tariffs generally fta members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large we also demonstrate how ftas may undermine the attainment of global free trade

a theory of trade concessions abstract we present a model of tariff disputes and concessions consisting of an infinitely repeated game under bilateral incomplete information given potential agreements to be reached through unilateral or reciprocal concessions we find that an agreement involving reciprocal concessions is reached immediately if the discount factor is large and or the volume of trade is small otherwise prior beliefs about country type matter when both countries hold pessimistic priors immediate reciprocal concessions still occur very different prior beliefs lead to an immediate unilateral concession of the pessimistic country whereas optimistic priors coupled with low discount factors may generate delayed agreements 1997 elsevier science b v all rights reserved

preferential trade agreements and multilateral tariff cooperation are preferential trade agreements ptas building or stumbling blocks for multilateral trade liberalization i address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly the central result is that when countries are symmetric a free trade agreement fta undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union cu does so via its effect on the cooperation incentives of members however when countries are asymmetric with respect to either market size or cost there exist circumstances where ptas facilitate multilateral tariff cooperation