EconPapers    
Economics at your fingertips  
 

A Theory of Gradual Trade Liberalization

Robert Staiger ()

No 4620, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 using 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.

JEL-codes: F13 (search for similar items in EconPapers)
Date: 1994-01
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Published as With Kyle Bagwell, published as "A Theory of Managed Trade", American Economic Review, Vol. 80, no. 4 (1990): 779-795.
Published as A. Deardorff, J. Levinsohn and R. Stern, eds. New Directions in Trade Theory, University of Michigan Press, 1995.

Downloads: (external link)
http://www.nber.org/papers/w4620.pdf (application/pdf)

Related works:
Working Paper: A Theory of Gradual Trade Liberalization (1994)
Working Paper: A Theory of Gradual Trade Liberalization (1994) Downloads
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:nbr:nberwo:4620

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4620

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-12-14
Handle: RePEc:nbr:nberwo:4620