Free Trade Areas with Politically Active Oligopolies
نویسنده
چکیده
I evaluate in this paper the impact of Free-Trade Areas (FTAs) on the world trade system using a model that emphasizes the role of oligopolistic industries in the shaping of trade policies, on account of both strategic and political reasons. In this context, I find that FTAs are likely a “building block” of the multilateral system. One reason for that regards the finding that FTAs induce their members to reduce their external tariffs, thus ensuring a move toward “trade creation.” Among other things, this result reflects the facts that a FTA weakens the profitshifting motive for protection (the “strategic effect”) and makes political influences less effective (the “distributive effect”). FTAs are shown to enhance also the prospects of a multilateral liberalization, by strengthening the support for the latter. This occurs precisely because of the softening of the strategic and the distributive motives for protection that accompany FTAs, as this will induce governments to center their trade regime decisions more on efficiency than on special interests criteria. ∗ I thank the seminar participants at the University of Wisconsin-Madison and especially Bob Staiger and Scott Taylor for very helpful comments in earlier versions of this paper.
منابع مشابه
Free Trade Areas , Policy Independence , and Industrialization Targets ∗
We investigate a mechanism whereby a group of nations forming a free trade area simultaneously can efficiently satisfy industrialization targets. The mechanism does not rely on cross-country transfers, and it is efficient for each member country individually even if other members of the free trade area do not implement the efficient policy. It allows each member country to gain from participati...
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