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Endogenous protection and trade diversion

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  • Richardson, Martin
Abstract
Traditional positive analysis of preferential trading areas has focused on the trade-offs between (beneficial) trade creation and (potentially harmful) trade diversion. We consider the latter phenomenon in the formation of a free-trade area (FTA) between countries where tariffs against non-members are set endogenously. We show that such tariffs will fall consequent to the formation of FTAs and trade diversion is likely to become trade creation. This is illustrated in a model in which tariffs are levied to maximize a political support function. We conclude with some comments on the generality of this result and directions for future research.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
    • Handle: RePEc:eee:inecon:v:34:y:1993:i:3-4:p:309-324
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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