Preferences, Rent Destruction and Multilateral Liberalisation: The Building Block Effect of CUSFTA

31 Pages Posted: 7 Nov 2012

See all articles by Tobias Ketterer

Tobias Ketterer

University of Nottingham - School of Economics

Daniel M. Bernhofen

American University - School of International Service; American University; American University - School of International Service

Chris Milner

University of Nottingham - School of Economics

Date Written: October 31, 2012

Abstract

If a free trade agreement (FTA) is characterized by the exchange of market access with a large and competitive trading partner, the agreement can cause a leakage of protectionist benefits to domestic industry from lobbying against external tariff cuts. This rent destruction effect of an FTA can free policy makers to be more aggressive in multi-lateral tariff cuts. We argue that the Canadian-US free trade agreement (CUSFTA) provides an ideal policy experiment to link this mechanism to the data. Exploring the determinants of Canada‘s tariff cuts at the 8 digit HS product level, we find that CUSFTA acted as an additional driver of Canadian multilateral tariff reductions during the Uruguay Round.

Keywords: preferences, rent destruction, multilateral liberalization, CUSFTA

JEL Classification: F130, F140

Suggested Citation

Ketterer, Tobias and Bernhofen, Daniel M. and Milner, Chris, Preferences, Rent Destruction and Multilateral Liberalisation: The Building Block Effect of CUSFTA (October 31, 2012). CESifo Working Paper Series No. 3985. Available at SSRN: https://ssrn.com/abstract=2171703

Tobias Ketterer

University of Nottingham - School of Economics ( email )

Nottingham, NG8 1BB
United Kingdom

Daniel M. Bernhofen (Contact Author)

American University - School of International Service ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
United States
2028856721 (Phone)

American University ( email )

4400 Massachusetts Av NW
Washington, DC 20015
United States
202-885-6721 (Phone)

HOME PAGE: http://www.american.edu/sis/faculty/dbernhof.cfm

American University - School of International Service ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
United States
2028856721 (Phone)

Chris Milner

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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