A strategic and welfare theoretic analysis of free trade areas

• Published in: Journal of international economics Vol. 64; no. 1; pp. 1 - 27
• Main Authors: Bond, Eric W., Riezman, Raymond G., Syropoulos, Constantinos
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.10.2004; Elsevier; Elsevier Sequoia S.A
• Series: Journal of International Economics
• Subjects: Economic models; Economic theory; Economics; Free trade; Free trade areas; International economics; Kemp–Wan tariff adjustments; Regionalism; Strategic interactions; Strategic planning; Studies; Tariffs; Welfare; Free trade areas; Regionalism; Kemp–Wan tariff adjustments; Welfare; F42; F11; F13; F15; Strategic interactions

We construct a three-country model to determine how the formation of free trade areas (FTAs) affects optimal tariffs and welfare. We find that, at constant rest of the world (ROW) tariffs, the adoption of internal free trade induces union members to reduce their external tariffs below the Kemp–Wan [...