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The UTR versus CU Formation Analysis and Article XXIV

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  • Ali El-Agraa

Abstract

In 1965, Cooper and Massell (Economic Journal 75: 742-7) showed that a policy of unilateral tariff reduction (UTR) was superior to the formation of a customs union (CU). Although their model was concerned with only static resource reallocation effects, many analysts treated the Cooper/Massell 'criticism' as if it applied to the entire CU formation issue. This was incomprehensible, especially when they themselves almost simultaneously developed a different model to demonstrate that two countries together can do more than each acting alone. Wonnacott and Wonnacott (1981,American Economic Review 71: 704-14) tried to revive the issue by claiming that the use of a three-country general equilibrium model with transportation costs and tariffs by the rest of the world could show that UTR need not dominate CU formation, but El-Agraa and Jones (2000,Applied Economics Letters 7: 301-4; Journal of Economic Integration 15: 239-59) have demonstrated that their claim is unwarranted, due to inadequacies in their model. This paper shows that the incorporation of WTO/GATT rules (Article XXIV) into an appropriately adjusted orthodox framework leads to the Wonnacott's conclusion.

Suggested Citation

  • Ali El-Agraa, 2002. "The UTR versus CU Formation Analysis and Article XXIV," Applied Economics Letters, Taylor & Francis Journals, vol. 9(9), pages 621-624.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:9:p:621-624
    DOI: 10.1080/13504850110111225
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    1. Ali El-Agraa & Anthony Jones, 2000. "On 'CU can dominate UTR'," Applied Economics Letters, Taylor & Francis Journals, vol. 7(5), pages 301-304.
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    Cited by:

    1. Innwon Park & Soonchan Park, 2011. "Best practices for regional trade agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(2), pages 249-268, June.
    2. Park, Innwon & Park, Soonchan, 2009. "Consolidation and Harmonization of Regional Trade Agreements (RTAs): A Path Toward Global Free Trade," MPRA Paper 14217, University Library of Munich, Germany, revised 23 Mar 2009.

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