Increasing returns, multinationals and geography of preferential trade agreements

• 成果类型: Article
• 署名作者: Ludema, RD
• 署名单位: Georgetown University; Georgetown University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(01)00130-1
• 发表日期: 2002
• 页码: 329-358
• 关键词: Regionalism; Trade agreements; multinational enterprises; Economic geography

摘要

This paper uses a model of horizontal multinational enterprises to explore the relationship between transportation costs and trade policy cooperation. Tariffs have the effect of attracting foreign direct investment to the benefit of consumers in the host country. As transport costs fall, the incentive to impose tariffs falls and the benefits to cooperation rise. Thus, in a repeated game in which cooperation is limited by a self-enforcement constraint, a reduction in transport costs facilitates free trade. This logic is applied to a three-country model to examine preferential trade agreements. It is found that if any country is too distant from the others, then global free trade is not attainable. Rather, if two of the countries are within a critical distance of each other and distant from the third country, then the unique outcome is an exclusive free trade agreement between the two adjacent countries. Thus, the model predicts a strong regional bias in preferential trade agreements. (C) 2002 Elsevier Science B.V. All rights reserved.