How does import market power matter for trade agreements?

Beshkar, Mostafa; Lee, Ryan

How does import market power matter for trade agreements?

Journal of International Economics, 2022, vol. 137, issue C

Abstract: We evaluate two potential causes of deviation from efficiency in WTO negotiations: (i) a free-riding problem that may be caused by the WTO's nondiscrimination requirement, and (ii) asymmetric information about government preferences. Theories based on the above two causes generate starkly different predictions about the pattern of negotiated tariffs. We find that the WTO agreement provides more tariff flexibility in products with lower import market power. This finding is consistent with the implication of a negotiation model under asymmetric information, which predicts a tradeoff between flexibility and discipline in tariff obligations. Finally, we use the model together with data on negotiated and applied tariffs to calibrate the political weight of each import-competing industry for all WTO member countries.

Keywords: Import market power; Tariff binding; Free-riding; Most favored nation clause; Flexible trade agreements; WTO (search for similar items in EconPapers)
JEL-codes: D02 D82 F13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:137:y:2022:i:c:s0022199622000125

DOI: 10.1016/j.jinteco.2022.103580

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