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Camouflaged Trade Agreements

Author

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  • Elie Appelbaum

    (Department of Economics, York University, Toronto, Canada)

  • Mark Melatos

Abstract

We raise the possibility that at least some of the free trade areas observed in practice are customs unions in disguise. We distinguish between generalized and standard customs unions. While members of the former can choose different external tariff rates, members of the latter levy a common external tariff. The chief insight is that, in practice, it is typically not possible to differentiate between a generalized customs union and a free trade area. We demonstrate that generalized customs unions will be established and offer an explanation for the design of Article XXIV of the General agreement on Tariffs and Trade.

Suggested Citation

  • Elie Appelbaum & Mark Melatos, 2012. "Camouflaged Trade Agreements," Working Papers 2012_2, York University, Department of Economics.
    • Handle: RePEc:yca:wpaper:2012_2
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    File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/2012/gcu.pdf
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    References listed on IDEAS

    as
    1. Emanuel Ornelas, 2007. "Exchanging market access at the outsiders' expense: the case of customs unions," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 207-224, February.
    2. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
    3. Jayjit Roy, 2010. "Do Customs Union Members Engage in More Bilateral Trade than Free‐Trade Agreement Members?," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 663-681, September.
    4. Caroline Freund & Emanuel Ornelas, 2010. "Regional Trade Agreements," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 139-166, September.
    5. Raymond RIEZMAN, 2013. "Customs Unions and the Core," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 3, pages 33-43, World Scientific Publishing Co. Pte. Ltd..
    6. Martin Richardson, 2017. "Why a Free Trade Area? The Tariff also Rises," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 6, pages 129-152, World Scientific Publishing Co. Pte. Ltd..
    7. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The magazine for economic performance 313, Centre for Economic Performance, LSE.
    8. Facchini, Giovanni & Silva, Peri & Willmann, Gerald, 2013. "The customs union issue: Why do we observe so few of them?," Journal of International Economics, Elsevier, vol. 90(1), pages 136-147.
    9. Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. "Trade Agreements as Endogenously Incomplete Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 394-419, March.
    10. Magee, Christopher S.P., 2008. "New measures of trade creation and trade diversion," Journal of International Economics, Elsevier, vol. 75(2), pages 349-362, July.
    11. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Toward Nonmembers?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1531-1575.
    12. Constantinos Syropoulos, 2002. "On Tariff Preferences And Delegation Decisions In Customs Unions: A Heckscher--Ohlin Approach," Economic Journal, Royal Economic Society, vol. 112(481), pages 625-648, July.
    13. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
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    Cited by:

    1. Gabriel Felbermayr & Feodora Teti & Erdal Yalcin & Gabriel J. Felbermayr, 2018. "On the Profitability of Trade Deflection and the Need for Rules of Origin," CESifo Working Paper Series 6929, CESifo.
    2. Felbermayr, Gabriel & Teti, Feodora & Yalcin, Erdal, 2019. "Rules of origin and the profitability of trade deflection," Journal of International Economics, Elsevier, vol. 121(C).
    3. Elie Appelbaum & Mark Melatos, 2018. "Are Customs Unions Really So Scarce?," The Economic Record, The Economic Society of Australia, vol. 94(307), pages 391-404, December.

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    More about this item

    Keywords

    Customs Union; Common External Tariff; Free Trade Area; General Agreement on Tariffs and Trade; Trade Agreement; World Trade Organization;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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