Reciprocated Unilateralism in Trade Reforms with Majority Voting
18 Pages Posted: 25 Oct 2004 Last revised: 2 Aug 2010
Date Written: October 2004
This paper shows how unilateral liberalization in one country can increase the voting support for reciprocal reduction in trade barriers in a partner country. When trade policies are determined simultaneously in the two countries, we show the possibility of multiple political equilibria - countries may both be protectionist or trade freely with each other. Starting with trade protection in both countries, a unilateral reform in one country is thus shown to bring about a free trade equilibrium (a self-enforcing state) that is consistent with majority voting in both countries.
Suggested Citation: Suggested Citation