On the Relationship between Preferential and Multilateral Trade Liberalization: The Case of Customs Unions

Kamal Saggi (), Alan Woodland and Halis Yildiz

Chapter 9 in Economic Analysis of the Rules and Regulations of the World Trade Organization, 2018, pp 186-222 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper compares equilibrium outcomes of two games of trade liberalization. In the Bilateralism game, countries choose whether to liberalize trade preferentially via a customs union (CU), multilaterally, or not at all. The Multilateralism game is a restricted version of the Bilateralism game in that countries cannot form CUs and can only undertake non-discriminatory trade liberalization. When countries have symmetric endowments, global free trade is the only stable equilibrium of both games. Allowing for endowment asymmetry, we isolate circumstances where the option to form CUs helps further the cause of multilateral liberalization as well as where it does not.

Keywords: Multilateral Trading System; Trade Agreements; Trade Liberalization; International Tariff Cooperation; WTO Disputes; Case Studies (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2018
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Related works:
Journal Article: On the Relationship between Preferential and Multilateral Trade Liberalization: The Case of Customs Unions (2013)
Working Paper: On the Relationship between Preferential and Multilateral Trade Liberalization: The Case of Customs Unions (2011)
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