[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/6607.html
   My bibliography  Save this paper

A Simple Model of The Juggernaut Effect of Trade Liberalisation

Author

Listed:
  • Baldwin, Richard
  • Robert-Nicoud, Frédéric
Abstract
This paper posits a formal political economy model where the principle of reciprocity in multilateral trade talks results in the gradual elimination of tariffs. Reciprocity trade talks turn each nation?s exporters into anti-protectionists at home; they lower foreign tariffs by convincing their own government to lower home tariffs. Due to the new array of political forces, each government finds it politically optimal to remove tariffs that it previously found politically optimal to impose. The one-off global tariff cut then reshapes the political economy landscape via entry and exit ? reducing the size/influence of import-competing sectors and increasing that of exporters. In the next round of trade talks governments therefore find it politically optimal to cut tariffs again. The process may continue until tariffs are eliminated.

Suggested Citation

  • Baldwin, Richard & Robert-Nicoud, Frédéric, 2007. "A Simple Model of The Juggernaut Effect of Trade Liberalisation," CEPR Discussion Papers 6607, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6607
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP6607
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Giovanni Maggi & Andrés Rodríguez-Clare, 2007. "A Political-Economy Theory of Trade Agreements," American Economic Review, American Economic Association, vol. 97(4), pages 1374-1406, September.
    2. Richard E. Baldwin & Rikard Forslid, 2010. "Trade Liberalization with Heterogeneous Firms," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 161-176, May.
    3. Baldwin, Richard & Robert-Nicoud, Frédéric, 2006. "Protection for Sale Made Easy," CEPR Discussion Papers 5452, C.E.P.R. Discussion Papers.
    4. Richard Baldwin & Frédéric Robert-Nicoud, 2015. "A simple model of the juggernaut effect of trade liberalisation," International Economics, CEPII research center, issue 143, pages 70-79.
    5. Brainard, S. Lael & Verdier, Thierry, 1997. "The political economy of declining industries: Senescent industry collapse revisited," Journal of International Economics, Elsevier, vol. 42(1-2), pages 221-237, February.
    6. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    7. Baldwin, Richard & Jaimovich, Dany, 2012. "Are Free Trade Agreements contagious?," Journal of International Economics, Elsevier, vol. 88(1), pages 1-16.
    8. Kyle Bagwell & Robert W. Staiger, 2012. "Profit Shifting And Trade Agreements In Imperfectly Competitive Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1067-1104, November.
    9. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
    10. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and Asymmetric Lobbying: Why Governments Pick Losers," Journal of the European Economic Association, MIT Press, vol. 5(5), pages 1064-1093, September.
    11. Rodney D. Ludema & Anna Maria Mayda, 2013. "Do terms-of-trade effects matter for trade agreements? Theory and evidence from WTO Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1837-1893.
    12. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Toward Nonmembers?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1531-1575.
    13. Yashiv, Eran, 2006. "U.S. Labor Market Dynamics Revisited," IZA Discussion Papers 2455, Institute of Labor Economics (IZA).
    14. Christos Genakos & Tommaso Valletti, 2011. "Testing The “Waterbed” Effect In Mobile Telephony," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1114-1142, December.
    15. Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, vol. 75(2), pages 329-348, July.
    16. Christian Broda & Nuno Limão & David E. Weinstein, 2018. "Optimal Tariffs and Market Power: The Evidence," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 2, pages 13-46, World Scientific Publishing Co. Pte. Ltd..
    17. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
    18. Baldwin, Richard, 1987. "Politically realistic objective functions and trade policy PROFs and tariffs," Economics Letters, Elsevier, vol. 24(3), pages 287-290.
    19. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    20. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    21. Kyle Bagwell & Robert W. Staiger, 2011. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization," American Economic Review, American Economic Association, vol. 101(4), pages 1238-1273, June.
    22. Baldwin, Richard, 2000. "Regulatory Protectionism, Developing Nations and a Two-Tier World Trade System," CEPR Discussion Papers 2574, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard Baldwin & Frédéric Robert-Nicoud, 2015. "A simple model of the juggernaut effect of trade liberalisation," International Economics, CEPII research center, issue 143, pages 70-79.
    2. Eric Conglin Chi & Halis Murat Yildiz, 2024. "Dynamic preferential trade agreement formation and the role of political economy," Economic Inquiry, Western Economic Association International, vol. 62(2), pages 748-781, April.
    3. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
    4. Kuenzel, David J. & Sharma, Rishi R., 2021. "Preferential trade agreements and MFN tariffs: Global evidence," European Economic Review, Elsevier, vol. 138(C).
    5. Richard Baldwin, 2016. "The World Trade Organization and the Future of Multilateralism," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 95-116, Winter.
    6. Olarreaga, Marcelo & Sperlich, Stefan & Trachsel, Virginie, 2016. "Export Promotion: what works?," CEPR Discussion Papers 11270, C.E.P.R. Discussion Papers.
    7. Baldwin, Richard, 2010. "Unilateral tariff liberalisation," CEPR Discussion Papers 8162, C.E.P.R. Discussion Papers.
    8. Farajzadeh, Zakariya & Zhu, Xueqin & Bakhshoodeh, Mohammad, 2017. "Trade reform in Iran for accession to the World Trade Organization: Analysis of welfare and environmental impacts," Economic Modelling, Elsevier, vol. 63(C), pages 75-85.
    9. Pierre-Louis Vézina, 2014. "Race-to-the-bottom Tariff Cutting," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 444-458, August.
    10. Jakubik, Adam & Keck, Alexander & Piermartini, Roberta, 2022. "Trade policy implications of a changing world: Tariffs and import market power," WTO Staff Working Papers ERSD-2022-14, World Trade Organization (WTO), Economic Research and Statistics Division.
    11. Beverelli, Cosimo & Boffa, Mauro & Keck, Alexander, 2014. "Trade policy substitution: Theory and evidence from Specific Trade Concerns," WTO Staff Working Papers ERSD-2014-18, World Trade Organization (WTO), Economic Research and Statistics Division.
    12. Richard Baldwin, 2014. "WTO 2.0: Governance of 21st century trade," The Review of International Organizations, Springer, vol. 9(2), pages 261-283, June.
    13. Bekkers, Eddy & Keck, Alexander, 2024. "Tariff spillovers and new rules for multilateral tariff negotiations," WTO Staff Working Papers ERSD-2024-01, World Trade Organization (WTO), Economic Research and Statistics Division.
    14. Yasar, Mahmut, 2013. "Political Influence of Exporting and Import-Competing Firms: Evidence from Eastern European and Central Asian Countries," World Development, Elsevier, vol. 51(C), pages 154-168.
    15. Eric Conglin Chi & Halis Murat Yildiz, 2024. "Bilateralism vs. multilateralism: Role of political economy for the prospect of multilateral free trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(3), pages 870-900, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Richard E. Baldwin, 2011. "Multilateralising Regionalism: Spaghetti Bowls as Building Blocks on the Path to Global Free Trade," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume I, chapter 2, Edward Elgar Publishing.
    2. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    3. Lorz, Oliver & Thede, Susanna, 2024. "Tariff overhang and aid: Theory and empirics," Journal of Development Economics, Elsevier, vol. 166(C).
    4. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    5. Olper, Alessandro, 2017. "The political economy of trade-related regulatory policy: environment and global value chain," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(3), February.
    6. Eric Conglin Chi & Halis Murat Yildiz, 2024. "Dynamic preferential trade agreement formation and the role of political economy," Economic Inquiry, Western Economic Association International, vol. 62(2), pages 748-781, April.
    7. Wilfred J. Ethier & Arye L. Hillman, 2017. "The Politics of International Trade," CESifo Working Paper Series 6456, CESifo.
    8. Giovanni Maggi & Ralph Ossa, 2020. "Are Trade Agreements Good For You?," NBER Working Papers 27252, National Bureau of Economic Research, Inc.
    9. Richard Baldwin, 2010. "Unilateral Tariff Liberalisation," NBER Working Papers 16600, National Bureau of Economic Research, Inc.
    10. Ralph Ossa, 2011. "A "New Trade" Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122-152.
    11. Bown, Chad P., 2014. "Trade policy instruments over time," Policy Research Working Paper Series 6757, The World Bank.
    12. Annicchiarico, Barbara & Marvasi, Enrico, 2019. "Protection for sale under monopolistic competition: Beyond the CES," European Journal of Political Economy, Elsevier, vol. 60(C).
    13. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    14. Beshkar, Mostafa & Bond, Eric W. & Rho, Youngwoo, 2015. "Tariff binding and overhang: Theory and evidence," Journal of International Economics, Elsevier, vol. 97(1), pages 1-13.
    15. Joseph S Shapiro, 2021. "The Environmental Bias of Trade Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 831-886.
    16. Kyle Bagwell & Robert W. Staiger, 2016. "The Design of Trade Agreements," NBER Working Papers 22087, National Bureau of Economic Research, Inc.
    17. Beshkar, Mostafa & Lee, Ryan, 2022. "How does import market power matter for trade agreements?," Journal of International Economics, Elsevier, vol. 137(C).
    18. Soderbery, Anson, 2018. "Trade elasticities, heterogeneity, and optimal tariffs," Journal of International Economics, Elsevier, vol. 114(C), pages 44-62.
    19. Jennifer Abel-Koch, 2013. "Endogenous Trade Policy with Heterogeneous Firms," Working Papers 1306, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 01 Aug 2013.
    20. Bown, Chad P. & Crowley, Meredith A., 2014. "Emerging economies, trade policy, and macroeconomic shocks," Journal of Development Economics, Elsevier, vol. 111(C), pages 261-273.

    More about this item

    Keywords

    Lobbying; Multilateral trade negotiations;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6607. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.