Welfare Implications of RTAs Within the WTO System in the Presence of FDI

Jung Hur and Donghyun Park

Open Economies Review, 2004, vol. 15, issue 1, 87-103

Abstract: We examine the welfare implications of the two major types of regional trade agreements (RTAs)—free trade agreements (FTAs) and customs unions (CUs)—within the WTO system in the presence of FDI. To do so, we analyze multilateral tariff cooperation in the context of two types of WTO regimes: a pure WTO regime without any RTAs and a modified WTO regime in which RTAs coexist with the multilateral framework. Our main finding is that in the presence of significant foreign ownership, RTAs within a multilateral system do not raise the national welfare of its members, thereby weakening the incentives of countries to form RTAs. Copyright Kluwer Academic Publishers 2004

Keywords: most favored nation clause; regional trade agreement; free trade agreement; customs union; FDI (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1023/B:OPEN.0000009427.83916.68

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