Developing-Country Benefits from MFN Relative to Regional/Bilateral Trade Arrangements

17 Pages Posted: 3 Oct 2003

See all articles by Madanmohan Ghosh

Madanmohan Ghosh

delete

Carlo Perroni

University of Warwick - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

John Whalley

University of Western Ontario - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for International Governance and Innovation (CIGI)

Abstract

Using a general-equilibrium model of world trade, this paper evaluates the benefits of most-favored-nation (MFN) treatment to developing countries in multilateral relative to bilateral or regional trade agreements, from three sources. First, developing countries may be able to free-ride on bilateral tariff concessions exchanged between larger countries in MFN-based GATT/WTO rounds. Second, MFN benefits developing countries by restricting discriminatory retaliatory actions by other countries, evaluated here by a non-cooperative Nash tariff game. Finally, MFN changes threat points in bargaining and hence affects the bargaining solution of multilateral MFN-based trade negotiation compared to a bilateral/regional arrangement. The authors find that the benefits to developing countries are small in the first case as the tariff rates are already low, and the benefits are small in the second case as the optimal tariffs under unconstrained retaliation are not very asymmetric. Benefits from the third case are large as large countries can extract large side-payments if they bargain bilaterally.

Suggested Citation

Ghosh, Madanmohan and Perroni, Carlo and Whalley, John, Developing-Country Benefits from MFN Relative to Regional/Bilateral Trade Arrangements. Review of International Economics, Vol. 11, pp. 712-728, September 2003. Available at SSRN: https://ssrn.com/abstract=450977

Carlo Perroni (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
44 24 7652 8416 (Phone)
44 24 7652 3032 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

John Whalley

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada
519-661-3509, ext. 83509 (Phone)
519-661-3666 (Fax)

HOME PAGE: http://www.ssc.uwo.ca/economics/faculty/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for International Governance and Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
33
Abstract Views
1,250
PlumX Metrics