How Bilateral Trade Deals Get in the Way of Multilateral Agreements

Jayson Beckman, Maros Ivanic and Saleem Shaik

No 333437, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Aghion et al. (2007) developed a dynamic bargaining model that considers bilateral versus multilateral trade agreements. Employing a ‘Nash in Nash’ applied general equilibrium framework, we provide empirical evidence for their approach. Considering the Trans-Pacific Partnership (TPP), our model determines the welfare maximizing set of bilateral trade agreements by sectors (there are ten) and compares that to an agreement involving all countries/sectors. We find that a multilateral agreement generates more collective welfare than most bilateral agreements and that this welfare gain is unlikely to be achieved by countries’ individual pursuit of bilateral agreements. We find that superadditivity (i.e., additional welfare associated with the expansion of free trade to additional sectors and countries) holds across all regions and all sectors, but not for every pair of regions and sectors. Thus, it is possible for a set of regions to increase their collective welfare by excluding some sectors from their trade agreement.

Keywords: International Relations/Trade; International Relations/Trade (search for similar items in EconPapers)
Pages: 38
Date: 2022
New Economics Papers: this item is included in nep-gth and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/333437/files/11006.pdf (application/pdf)

Related works:
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:pugtwp:333437

Access Statistics for this paper

More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().