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Feasible multilateralism and the effects of regionalism

Ornelas, Emanuel (2008) Feasible multilateralism and the effects of regionalism. Journal of International Economics, 74 (1). pp. 202-224. ISSN 0022-1996

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Identification Number: 10.1016/j.jinteco.2007.05.006

Abstract

Recent research shows that the GATT/WTO negotiating rules are capable of delivering a politically efficient equilibrium. Such an equilibrium is, however, economically inefficient. Global free trade, in particular, is unattainable even in a fully cooperative world, if governments have political motivations. In such a context, we show that regional trade agreements can help move the world towards a welfare-superior equilibrium. The reason is that, when members of regional trade agreements lower trade barriers against one another, they tend to reduce their multilateral tariffs as well. Once we account for these endogenous changes—and only then—we find that regionalism can raise world welfare even in a fully cooperative (but political) world. Regional integration can, however, harm outsiders.

Item Type: Article
Official URL: http://www.elsevier.com/wps/find/journaldescriptio...
Additional Information: © 2008 Elsevier
Subjects: H Social Sciences > HC Economic History and Conditions
J Political Science > JA Political science (General)
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
F - International Economics > F5 - International Relations and International Political Economy > F59 - International Relations and International Political Economy: Other
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Date Deposited: 13 Jul 2011 13:48
Last Modified: 06 Jun 2012 17:54
URI: http://eprints.lse.ac.uk/id/eprint/37052

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