A Simple Model of the Juggernaut Effect of Trade Liberalisation

Richard Baldwin and Frédéric Robert-Nicoud

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper posits a formal political economy model where the principle of reciprocity inmultilateral trade talks results in the gradual elimination of tariffs. Reciprocity trade talks turneach nation's exporters into anti-protectionists at home; they lower foreign tariffs byconvincing their own government to lower home tariffs. Due to the new array of politicalforces, each government finds it politically optimal to remove tariffs that it previously foundpolitically optimal to impose. The one-off global tariff cut then reshapes the politicaleconomy landscape via entry and exit - reducing the size/influence of import-competingsectors and increasing that of exporters. In the next round of trade talks governmentstherefore find it politically optimal to cut tariffs again. The process may continue until tariffsare eliminated.

Keywords: Trade policy; Economic integration (search for similar items in EconPapers)
JEL-codes: F13 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-pol
Date: 2008-01
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Related works:
Working Paper: A Simple Model of The Juggernaut Effect of Trade Liberalisation (2007)
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