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Free Trade Networks on Non-tariff Barriers

Author

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  • Yasunori Okumura

Abstract

In this paper, we examine the formation of free trade agreements on eliminating non-tariff barriers as a network formation game. A firm faces an import volume quota in a foreign country, which it cannot exceed but can be removed through bilateral free trade agreements. We focus on the stable free trade agreements networks, considering the case where each country determines the quotas of the foreign firms. We show that global free trade may not be achieved in any stable network. Moreover, all countries may be autarkic in a stable network. Finally, we demonstrate that our main results continue to hold regardless of the type of non-tariff barriers, such as import licences, import share quotas, and technical measures for increasing the production costs of foreign firms. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Yasunori Okumura, 2015. "Free Trade Networks on Non-tariff Barriers," Journal of Industry, Competition and Trade, Springer, vol. 15(3), pages 223-238, September.
    • Handle: RePEc:kap:jincot:v:15:y:2015:i:3:p:223-238
    DOI: 10.1007/s10842-014-0184-2
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    References listed on IDEAS

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    Cited by:

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    2. Maria Cipollina & Federica Demaria & Filomena Pietrovito, 2016. "Determinants of Trade: the Role of Innovation in Presence of Quality Standards," Journal of Industry, Competition and Trade, Springer, vol. 16(4), pages 455-475, December.
    3. Okumura, Yasunori, 2015. "Volume and share quotas in Cournot competition," Economic Modelling, Elsevier, vol. 47(C), pages 137-144.

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    More about this item

    Keywords

    Free trade agreements; Non-tariff barriers; Network formation; Cournot; F13; F12; D85;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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