Customs Unions and Comparative Advantage

Constantinos Syropoulos ()

Oxford Economic Papers, 1999, vol. 51, issue 2, 239-66

Abstract: This paper constructs a simple, general equilibrium trade model to investigate how the formation of unconstrained, GATT-constrained, and Kemp-Wan customs unions affects interbloc tariffs and welfare. A central point of the paper is that the liberalization of intraunion trade creates incentives for all parties to reduce their remaining tariffs. Despite this, regional integration may not benefit nonmember countries and, depending on trade patterns and comparative advantage, it may raise welfare of members more than a regime of globally free trade. Copyright 1999 by Royal Economic Society.

Date: 1999
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