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The Farsighted Stability of Global Tade Policy Arrangements

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  • Stefan Berens
  • Lasha Chochua
  • Gerald Willmann

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.

Suggested Citation

  • Stefan Berens & Lasha Chochua & Gerald Willmann, 2021. "The Farsighted Stability of Global Tade Policy Arrangements," CESifo Working Paper Series 9213, CESifo.
    • Handle: RePEc:ces:ceswps:_9213
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    More about this item

    Keywords

    trade policy arrangements; stability; unlimited farsightedness;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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