Bilateralism and Free Trade

30 Pages Posted: 1 Mar 2007

See all articles by Sanjeev Goyal

Sanjeev Goyal

University of Cambridge

Sumit Joshi

George Washington University - Department of Economics


We study a setting with many countries; in each country there are firms that can sell in the domestic as well as foreign markets. Countries can sign bilateral free-trade agreements that lower import tariffs and thereby facilitate trade. We allow a country to sign any number of bilateral free-trade agreements. A profile of free-trade agreements defines the trading regime. Our principal finding is that, in symmetric settings, bilateralism is consistent with global free trade. We also explore the effects of asymmetries across countries and political economy considerations on the incentives to form trade agreements.

Suggested Citation

Goyal, Sanjeev and Joshi, Sumit, Bilateralism and Free Trade. International Economic Review, Vol. 47, No. 3, pp. 749-778, August 2006, Available at SSRN: or

Sanjeev Goyal (Contact Author)

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Sumit Joshi

George Washington University - Department of Economics ( email )

Monroe Hall, Suite 340
2115 G Street, NW
Washington, DC 20052
United States
(202) 994-6154 (Phone)
(202) 994-6147 (Fax)


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