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Endogenous Preferential Trade Agreements

Author

Listed:
  • Novo Peteiro, José Antonio

    (Universidade da Coruña)

  • Sánchez de Paz, Elena

    (Universidade da Coruña)

Abstract

This paper shows that preferential trade agreements can emerge in an endogenous way. We use a simple international trade model where govern - ments fix their tariffs in order to maximize social welfare. We find that when countries behave in a non co-operative way this performance leads to tariff dis - crimination. This result holds whether firms play a Cournot strategy or whether they follow a Stackelberg’s leader-follower strategy. This paper also analyzes whether multilateralism and regionalism are complementary or sub - stitutive processes. It is concluded that, in spite of the fact that absolute protec - tion is reduced as a result of the economic integration process, relative protec - tion against the rest of the world increases and, therefore, the two processes should not be considered as complementary.

Suggested Citation

  • Novo Peteiro, José Antonio & Sánchez de Paz, Elena, 1999. "Endogenous Preferential Trade Agreements," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 419-431.
  • Handle: RePEc:ris:integr:0111
    as

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    More about this item

    Keywords

    Economic Integration Country; Industry Studies of Trade Commercial Policies;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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