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"Firm Input Choice Under Trade Policy Uncertainty", JIE 2023, Kyle Handley, Nuno Limão, Rodney D. Ludema and Zhi Yu
No full textReplication Package for“Firm Input Choice Under Trade Policy Uncertainty”By Kyle Handley , Nuno Limão , Rodney D. Ludema and Zhi YuNovember 2023THIS DATASET IS ARCHIVED AT DANS/EASY, BUT NOT ACCESSIBLE HERE. TO VIEW A LIST OF FILES AND ACCESS THE FILES IN THIS DATASET CLICK ON THE DOI-LINK ABOV
INTERNATIONAL TRADE BARGAINING AND THE MOST-FAVORED-NATION CLAUSE
No full textThis paper advances a model of multilateral trade negotiations to analyze the effects of the most-favored-nation clause (MFN) on international trade agreements. Negotiations are modeled in a three player, non-cooperative, dynamic bargaining framework that admits the possibility of both bilateral and multilateral agreements. The central result is that bargaining in the presence of MFN results in Pareto efficient, mutually advantageous, multilateral trade agreements. The free-rider problem commonly attributed to the presence of MFN does not arise, and, under a condition of symmetry, each country receives equal gains (or reciprocity) from the agreement. In the absence of MFN, many of these properties may not hold. Examples are given in which at most two of the three countries benefit from agreement. These results suggest that many of the criticisms levied against the MFN clause are misplaced; moreover, attempts to replace unconditional MFN with conditional MFN may sacrifice many of the long-held values of the GATT. Copyright 1991 Blackwell Publishers Ltd..
Increasing Returns, Multinationals and Geography of Preferential Trade Agreements
No full textThis paper uses a model of horizontal multinational enterprises to explore the relationship between transportation costs and trade policy cooperation. Tariffs have the effect of attracting foreign direct investment to the benefit of consumers in the host country. As transport costs fall, the incentive to impose tariffs falls and the benefits to cooperation rise. Thus, in a repeated game in which cooperation is limited by a self-enforcement constraint, a reduction in transport costs facilitates free trade. This logic is applied to a three-country model to examine preferential trade agreements. It is found that if any country is too distant from the others, then global free trade is not attainable. Rather, if two of the countries are within a critical distance of each other and distant from the third country, then the unique outcome is an exclusive free trade agreement between the two adjacent countries. Thus, the model predicts a strong regional bias in preferential trade agreements
On the Value of Preferential Trade Agreements in Multilateral Negotiations
No full textThis paper explores the effects of preferential trade agreements (PTAs) on multilateral negotiations using a three-country, noncooperative bargaining model. PTAs are treated as outside options of the multilateral negotiation, with the feature that they continue to negotiate after they form. The organization of a PTA, whether into a customs union (CU) or free-trade area (FTA), is crucial. CUs benefit from the strategic commitment afforded by common external trade barriers, but this benefit is reduced by asymmetry between the CU partners and by discounting. It is also affected by externalities that any additional PTAs impose on members of the first. FTAs reduce the multilateral bargaining outcome effectively to one of simultaneous bilateral bargaining, whereas CUs result in a large share going to the country that has the first option of forming one. By way of example it is shown that, when CUs and FTAs are considered together, the distribution lies in between the pure FTA and CU outcomes, and there is no general presumption that relatively large countries will prefer a regime that permits PTAs to one that does not.
Optimal International Trade Agreements and Dispute Settlement Procedures
No full textThis paper explores the limits of international trade cooperation in the presence of a dispute settlement procedure. The dispute settlement procedure is modeled as set of conditions imposed on the punishment equilibria of a repeated tariff game, conditions that are consistent with the WTO principles of conciliation and reciprocity. The resulting equilibria are "renegotiation-proof" in the sense of Pearce (1987). We find that tariff agreements cannot achieve free trade in the presence of the dispute settlement procedure, although the cost of this limitation becomes small for high discount factors. Quota agreements can achieve free trade under the dispute settlement procedure; however, countries would always prefer to settle disputes with tariff sanctions, if given a choice. These results are related to recent dispute settlement reforms
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