External trade diversion, exclusion incentives and the nature of preferential trade agreements

• 成果类型: Article
• 署名作者: Missios, Paul; Saggi, Kamal; Yildiz, Halis Murat
• 署名单位: Toronto Metropolitan University; Vanderbilt University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2016.01.002
• 发表日期: 2016
• 页码: 105-119
• 关键词: Free Trade Agreement; Customs union; Hub and spoke agreements; Free trade; Optimal tariffs

摘要

In a game of endogenous trade agreements between three countries, we show that while the pursuit of customs unions (CUs) prevents global free trade from emerging as a coalition-proof Nash equilibrium, the pursuit of free trade agreements (FTAs) does not. This result reflects the relatively flexible nature of FTAs: whereas each FTA member can independently undertake further trade liberalization with respect to the non-member, CU members must do so as a group due to their common external tariff. By diverting members' exports away from the non-member, both types of trade agreements induce the non-member to voluntarily lower its import tariffs. (C) 2016 Elsevier B.V. All rights reserved.