A Theory Of Gradual Trade Liberation
Robert Staiger ()
No 292702, SSRI Workshop Series from University of Wisconsin-Madison, Social Systems Research Institute
This paper proposes a theory of gradual trade liberalization. I consider countries that are limited to self-enforcing arrangements in their trade relations. I argue that enforcement problems associated with the maintenance of low cooperative tariffs are exacerbated by the presence of resources in the import-competing sector that are· (or potentially could be) earning rents from their sector-specific skills. Intuitively, by being able to transform into rents a portion of what otherwise would be dead weight loss under a tariff hike, the presence of such resources makes deviation from a low cooperative tariff to a high tariff more desirable for the deviating country, and makes punishments under reciprocally high tariffs less painful. Hence, the presence of rent-collecting resources in an import-competing sector acts as a deterrent to trade liberalization. But if an initial "round" of liberalization can induce at least a portion of these resources in the import-competing sector to relocate to the rest of the economy, and if by not ~sing their sector-specific skills these resources stand to lose them, then the enforcement issues associated with their presence will also diminish over time, and further rounds of liberalization are made possible by the effects of the initial round. I formalize this gradual process of trade liberalization, and explore the consequences of a failed round of liberalization for the ability to maintain current levels of cooperation.
Keywords: Research; Methods/; Statistical; Methods (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ags:uwssri:292702
Access Statistics for this paper
More papers in SSRI Workshop Series from University of Wisconsin-Madison, Social Systems Research Institute Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().