The farsighted stability of global trade policy arrangements

Stefan Berens, Lasha Chochua and Gerald Willmann

No 2193, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: We study the stability of trade policy arrangements under two regulatory scenarios, with/without PTAs. Unlike previous papers, we consider an extensive set of trade policy constellations and allow for unlimited farsightedness of negotiating parties. We find global free trade (GFT) to be uniquely stable under symmetry, with/without PTAs. When two countries are smaller(larger) than the third, availability of PTAs decreases (increases) the stability of GFT. Away from symmetry, GFT is not attainable, and without PTAs the non-cooperative MFN regime is the only stable outcome. The effect of (dis-)allowing PTAs thus depends on the size asymmetry of countries.

Keywords: Trade Policy Arrangements; Stability; Unlimited Farsightedness (search for similar items in EconPapers)
JEL-codes: F13 F55 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2193

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