Economics at your fingertips  


Rodney Ludema ()

Economics and Politics, 1991, vol. 3, issue 1, 1-20

Abstract: This paper advances a model of multilateral trade negotiations to analyze the effects of the most‐favored‐nation clause (MFN) on international trade agreements. Negotiations are modeled in a three player, non‐cooperative, dynamic bargaining framework that admits the possibility of both bilateral and multilateral agreements. The central result is that bargaining in the presence of MFN results in Pareto efficient, mutually advantageous, multilateral trade agreements. The free‐rider problem commonly attributed to the presence of MFN does not arise, and, under a condition of symmetry, each country receives equal gains (or reciprocity) from the agreement. In the absence of MFN, many of these properties may not hold. Examples are given in which at most two of the three countries benefit from agreement. These results suggest that many of the criticisms levied against the MFN clause are misplaced; moreover, attempts to replace unconditional MFN with conditional MFN may sacrifice many of the long‐held values of the GATT.

Date: 1991
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0954-1985

Access Statistics for this article

Economics and Politics is currently edited by Peter Rosendorff

More articles in Economics and Politics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2019-10-18
Handle: RePEc:bla:ecopol:v:3:y:1991:i:1:p:1-20