Tariff Cooperation in Free Trade Areas

Joseph Mai and Andrey Stoyanov

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops a model of endogenous trade policy formation to study the impact of free trade agreements (FTA) on external trade policies of member states when they internalize the intra-bloc welfare effects. This model is empirically tested using global trade data covering 170 countries and 177 FTAs established between 1988 and 2011. We find empirical evidence of tariff cooperation between members of FTAs. Using three different measures of political relations (the affinity scores from the UN General Assembly Voting Data, dyad alliances data, and bilateral events and interactions data), we show that members with good political relations cooperate more on external tariff policy after formation of FTAs. On average, an increase in the market share of FTA partners' firms by one standard deviation is associated with about 3 percentage points increase in external tariffs.

Keywords: Free trade agreements; cooperative trade policies; import tariffs (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 (search for similar items in EconPapers)
Date: 2018-02-06
New Economics Papers: this item is included in nep-cdm and nep-int
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:84398

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