BILATERALISM AND FREE TRADE

Sanjeev Goyal and Sumit Joshi

International Economic Review, 2006, vol. 47, issue 3, 749-778

Abstract: We study a setting with many countries; in each country there are firms that can sell in the domestic as well as foreign markets. Countries can sign bilateral free-trade agreements that lower import tariffs and thereby facilitate trade. We allow a country to sign any number of bilateral free-trade agreements. A profile of free-trade agreements defines the trading regime. Our principal finding is that, in symmetric settings, bilateralism is consistent with global free trade. We also explore the effects of asymmetries across countries and political economy considerations on the incentives to form trade agreements. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2006
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Working Paper: Bilateralism and free trade (1999)
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