A Simple Model of the Juggernaut Effect of Trade Liberalisation
Richard E. Baldwin
University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. DP6607
This paper posits a formal political economy model where the principle of reciprocity in multilateral trade talks results in the gradual elimination of tariffs. Reciprocity trade talks turn each nation's exporters into anti-protectionists at home; they lower foreign tariffs by convincing their own government to lower home tariffs. Due to the new array of political forces, each government finds it politically optimal to remove tariffs that it previously found politically optimal to impose. The one-off global tariff cut then reshapes the political economy landscape via entry and exit - reducing the size/influence of import-competing sectors and increasing that of exporters. In the next round of trade talks governments therefore find it politically optimal to cut tariffs again. The process may continue until tariffs are eliminated.
Number of Pages in PDF File: 20
Keywords: Lobbying, Multilateral Trade Negotiations
JEL Classification: F13, F15working papers series
Date posted: June 9, 2008
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