Lobbying, Multisector Trade and Sustainability of Free-Trade Agreements¤
نویسنده
چکیده
This paper is concerned with the sustainability of free-trade areas. I begin with an FTA that is formed as a political equilibrium and examine conditions under which the FTA is sustainable, i.e., governments do not leave it. The sustainability of the FTA is in°uenced by governments' valuation on political contributions, discount factors, the lobbying position of the speci ̄c-interest group in intra-industry trade sector, and the sectoral coverage of the FTA. I ̄nd that (i) under certain conditions, the lobby-opposed FTA could be more sustainable than the FTA formed without political pressure; (ii) the lobby-supported FTA is more sustainable than the lobbyopposed FTA and the FTA formed without political pressure; and (iii) multisector trade enhances FTA sustainability. The last result holds because countries have di®erent incentive constraints for FTAs in di®erent sectors, and multisector trade allows them to transfer sustainability from strong ones to weak ones.
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