On necessarily welfare-enhancing free trade areas

• 成果类型: Article
• 署名作者: Panagariya, A; Krishna, P
• 署名单位: University System of Maryland; University of Maryland College Park; Brown University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(01)00152-0
• 发表日期: 2002
• 页码: 353-367
• 关键词: Free trade areas; Customs unions; Kemp-Wan; welfare rules of origin; external tariff

摘要

The well-known Kemp-Vanek-Ohyama-Wan proposition establishes that if two or more countries form a customs union (CU) by freezing their net external trade vector through a common external tariff and eliminating internal trade barriers, the union as a whole and the rest of the world cannot be worse off than before. Owing to the fact that a Free Trade Area (whose member countries impose country specific external tariff vectors) does not equalize marginal rates of substitution across its member countries (in contrast to a CU), the literature has been unable to provide a parallel demonstration regarding welfare improving Free Trade Areas (FTAs). The present paper eliminates this gap. In extending the result to the case with intermediate inputs, the paper also sheds new light on the rules of origin required to support such necessarily welfare enhancing FrAs. We show here that provided no trade deflection is permitted, all that is required by way of rules of origin is that the goods produced within the union - whether final or intermediate - be allowed to be traded freely. The proportion of domestic value added in final goods does not enter as a criterion in the rules of origin. (C) 2002 Elsevier Science B.V. All rights reserved.