Is the WTO Article XXIV bad?

Mrázová, Monika, Vines, David and Zissimos, Ben (2010) Is the WTO Article XXIV bad? CEP Discussion Papers (CEPDP1021). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

This paper shows that the WTO's Article XXIV increases the likelihood of free trade, but may worsen world welfare when free trade is not reached and customs unions (CUs) form. We consider a model of many countries. Article XXIV prevents a CU from raising its common external tariff, which makes CU formation less attractive and explains why free trade is more likely. In an equilibrium where two CUs do form, one is necessarily larger than the other. We show that Article XXIV has a 'composition effect' on CU formation, whereby CUs are (endogenously) more symmetric in size so more goods are subject to tariff distortions as they move between CUs; thus Article XXIV may be 'bad' for world welfare.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2010 The Author(s)
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HF Commerce
JEL classification:	F - International Economics > F0 - General > F02 - International Economic Order F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations F - International Economics > F1 - Trade > F15 - Economic Integration
Date Deposited:	21 Feb 2024 13:45
Last Modified:	21 Feb 2024 14:00
URI:	http://eprints.lse.ac.uk/id/eprint/121915

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