Regional Integration and Lobbying for Tariffs against Nonmembers

Olivier Cadot, Jaime de Melo and Marcelo Olarraga

International Economic Review, 1999, vol. 40, issue 3, 635-57

Abstract: We study the impact of regional trading arrangements (RIAs) on tariff policy toward nonmembers in a three-good, three-country political economy model. Comparing free-trade areas (FTAs) with and without rules of origin and customs unions (CUs) with varying degrees of economic and political integration. We show how increasingly deep integration can lead to rising protection against nonmember imports. Other differences between ETAs and CUs like the extent of free-riding in a CU and any component of a CU's tariff designed to improve the members' terms of trade, are not explicitly accounted for. Nevertheless, the results suggest that FTAs are likely to welfare dominate CUs. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1999
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Working Paper: Regional Integration and Lobbying for Tariffs Against Non-members (1996)
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