Signaling in Trade Agreements

21 Pages Posted: 4 Apr 2002

See all articles by Josh Ederington

Josh Ederington

Miami University - Farmer School of Business

Phillip McCalman

University of California, Santa Cruz - Department of Economics

Date Written: March 2002

Abstract

In the paper, we show how the potential signaling properties of trade agreements can explain two notable features of the international trading system. First, many trade agreements involve gradual, rather than immediate, reduction of trade barriers. We demonstrate how gradualism can serve as a mechanism by which countries signal their ability to commit to future liberalization by cooperating with the current round of tariff negotiations. Second, there has been a recent emphasis on regional, as opposed to multilateral, trade liberalization. In this paper, we demonstrate that such preferential trade agreements can actually serve as "building blocks" to multilateral trade negotiations by allowing countries to signal their commitment to trade agreements.

Keywords: Trade agreements; Gradualism; Regional Agreements; Repeated Games

JEL Classification: F02, F13, F15

Suggested Citation

Ederington, Josh and McCalman, Phillip, Signaling in Trade Agreements (March 2002). Available at SSRN: https://ssrn.com/abstract=304962 or http://dx.doi.org/10.2139/ssrn.304962

Josh Ederington (Contact Author)

Miami University - Farmer School of Business ( email )

800 East High Street
Oxford, OH 45056
United States

Phillip McCalman

University of California, Santa Cruz - Department of Economics ( email )

Santa Cruz, CA 95064
United States
(831) 459-4381 (Phone)
(831) 459-5900 (Fax)