The MFN clause, welfare, and multilateral cooperation between countries of unequal size

Kamal Saggi ()

Chapter 14 in Economic Analysis of the Rules and Regulations of the World Trade Organization, 2018, pp 312-323 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper analyzes MFN in a “competing exporters” model of trade between three countries with unequal endowments and shows that MFN yields higher aggregate welfare than tariff discrimination even as it makes low income countries worse off. Furthermore, in a repeated game of tariff cooperation, multilateral free trade is easier to sustain under MFN punishments relative to discriminatory ones. This conclusion holds even when tariff discrimination takes the form of bilateral trade agreements. Overall, the analysis shows that from the viewpoint of low income countries, MFN and multilateral tariff cooperation are complementary in nature.

Keywords: Multilateral Trading System; Trade Agreements; Trade Liberalization; International Tariff Cooperation; WTO Disputes; Case Studies (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2018
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Journal Article: The MFN clause, welfare, and multilateral cooperation between countries of unequal size (2009)
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