Different Paths to Free Trade: The Gains from Regionalism
- 1 November 2000
- journal article
- Published by Oxford University Press (OUP) in The Quarterly Journal of Economics
- Vol. 115 (4), 1317-1341
- https://doi.org/10.1162/003355300555088
Abstract
We compare free trade reached through expanding regional trading blocs to free trade accomplished by multilateral negotiation. With sunk costs, the outcomes are different. Trade in an imperfectly competitive good flows disproportionately more between the original members of a regional agreement even after free trade is reached. They secure a higher welfare level from regionalism than from free trade achieved multilaterally; nonmembers, however, reach a lower welfare level. A surprising result is that world welfare during free trade is greater when it is achieved by the regional path. We conclude with some empirical evidence from the European Union that is consistent with the model.Keywords
This publication has 17 references indexed in Scilit:
- Regionalism and Multilateralism: A Political Economy ApproachThe Quarterly Journal of Economics, 1998
- The size of trading blocs Market power and world welfare effectsJournal of International Economics, 1996
- First-mover advantages from pioneering new markets: A survey of empirical evidenceReview of Industrial Organization, 1994
- Persistent Trade Effects of Large Exchange Rate ShocksThe Quarterly Journal of Economics, 1989
- Hysteresis, Import Penetration, and Exchange Rate Pass-ThroughThe Quarterly Journal of Economics, 1989
- Persuasion or Information? Promotion and the Shares of Brand Name and Generic PharmaceuticalsThe Journal of Law and Economics, 1988
- Sources of Market Pioneer Advantages: The Case of Industrial Goods IndustriesJournal of Marketing Research, 1988
- Sources of Market Pioneer Advantages in Consumer Goods IndustriesJournal of Marketing Research, 1985
- Export subsidies and international market share rivalryJournal of International Economics, 1985
- A ‘reciprocal dumping’ model of international tradeJournal of International Economics, 1983