Endogenous Preferential Trade Agreements

José Antonio Novo Peteiro () and Elena Sánchez de Paz
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José Antonio Novo Peteiro: Universidade da Coruña, Postal: Naya; Facultade de Ciencias Económicas e, Empresariais; Campus da Zapateira s/n; 15071 A Coruña; Spain
Elena Sánchez de Paz: Universidade da Coruña, Postal: Naya; Facultade de Ciencias Económicas e, Empresariais; Campus da Zapateira s/n; 15071 A Coruña; Spain

Journal of Economic Integration, 1999, vol. 14, 419-431

Abstract: This paper shows that preferential trade agreements can emerge in an endogenous way. We use a simple international trade model where govern - ments fix their tariffs in order to maximize social welfare. We find that when countries behave in a non co-operative way this performance leads to tariff dis - crimination. This result holds whether firms play a Cournot strategy or whether they follow a Stackelberg’s leader-follower strategy. This paper also analyzes whether multilateralism and regionalism are complementary or sub - stitutive processes. It is concluded that, in spite of the fact that absolute protec - tion is reduced as a result of the economic integration process, relative protec - tion against the rest of the world increases and, therefore, the two processes should not be considered as complementary.

Keywords: Economic Integration Country; Industry Studies of Trade Commercial Policies (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0111

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