The Welfare Effects of Imperfect Harmonization of Trade and Industrial Policy

Konstantine Gatsios and Larry Karp

No 51256, Working Papers from International Agricultural Trade Research Consortium

Abstract: Partial cooperation in setting trade policy may be worse than no cooperation for countries who form a customs union. The paper investigates three situations where this is likely to occur. First, if the countries forming the union comprise too small a percentage of the non-competitive sector of the industry, their cooperation may be disadvantageous for essentially the same reason that a merger may be disadvantageous in oligopolistic industries. Second, even if the countries forming the union comprise the entire non-competitive sector of industry, cooperation on trade policy may be disadvantageous if industrial policy (e.g. investment subsidies) are chosen non-cooperatively. The reason is that cooperation in trade policy may exacerbate the inefficiencies created by non-cooperation at an earlier stage. Third, cooperation in choosing trade policies may encourage excessive investment by competitive importers and thus reduce the demand faced by the oligopolists.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 52
Date: 1989
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/51256/files/89-5.pdf (application/pdf)

Related works:
Journal Article: The Welfare Effects of Imperfect Harmonisation of Trade and Industrial Policy (1992)
Working Paper: The Welfare Effects of Imperfect Harmonization of Trade and Industrial Policy (1989)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:iatrwp:51256

DOI: 10.22004/ag.econ.51256

Access Statistics for this paper

More papers in Working Papers from International Agricultural Trade Research Consortium Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().