UTR vs. CU Formation: The Missing CET

Ali M. El-Agraa () and Anthony J. Jones
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Ali M. El-Agraa: Fukuoka University, Postal: International Economics and European &, American Economies, Faculty of Commerce, Fukuoka University, Japan and Visiting, Professor of Economics 1997-8, Vanderbilt University
Anthony J. Jones: University of Leeds, Postal: University of Leeds

Journal of Economic Integration, 2000, vol. 15, 239-259

Abstract: In 1965, Cooper and Massell (CM), using a partial-equilibrium trade model, reached the conclusion that a policy of unilateral tariff reduction (UTR) is superior to the formation of a customs union (CU). Wonnacott and Wonnacott (WW) challenged this conclusion in 1981 by claiming to show that UTR need not dominate a CU. In this article, we demonstrate that the incorpo - ration of a common external tariff in WW?s CU model not only restores the validity of CM?s conclusion but also leads to the new proposition that the mutual adoption of non-discriminatory free trade policies is superior to UTR. (JEL Classifications: F13, F02)

Keywords: Tariffs; Customs Unions; Unilateral policies (search for similar items in EconPapers)
JEL-codes: F02 F13 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0131

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