A strategic and welfare theoretic analysis of free trade areas

• 成果类型: Article
• 署名作者: Bond, EW; Riezman, RG; Syropoulos, C
• 署名单位: State University System of Florida; Florida International University; University of Iowa; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(03)00078-3
• 发表日期: 2004
• 页码: 1-27
• 关键词: Regionalism; Free Trade Areas; Kemp-Wan tariff adjustments; strategic interactions; welfare

摘要

We construct a three-country model to determine how the formation of free trade areas (FTAs) affects optimal tariffs and welfare. We find that, at constant rest of the world (ROW) tariffs, the adoption of internal free trade induces union members to reduce their external tariffs below the Kemp-Wan [J. Int. Econom. 6 (1976) 95-97] level, and causes ROW's terms of trade to improve and its welfare to rise. When ROW also behaves optimally, its policy response to the formation of the FTA is to raise tariffs. Generally, FTA members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large. We also demonstrate how FTAs may undermine the attainment of global free trade. (C) 2003 Elsevier B.V. All rights reserved.