Can bilateralism ease the pains of multilateral trade liberalization?

Article Abstract:

Using the influence-driven approach to endogenous trade-policy determination, we show how a free-trade agreement (FTA) with rules of origin can work as a device to compensate losers from trade liberalization. The FTA constructed in this paper is characterized by external tariff structures that are negatively correlated across member countries, ensuring efficiency gains and, through reduced average protection, compatibility with the multilateral trading system's requirements. It is also politically viable, and we demonstrate that, in the countries concerned, governments are willing to include its formation in the political agenda in spite of the fact that, in equilibrium, political contribution from producer lobbies decline after the agreement. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: F11; F13; F15 Keyword: Free-trade areas; political economy

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Country asymmetries, endogenous product choice and the timing of trade liberalization

Article Abstract:

We analyze the effects of trade liberalization on firms' decision and profits in a vertical product differentiation model with countries which have different characteristics. Firms decide product specifications at the beginning of the game, in which autarky is followed by trade liberalization (whose date is anticipated). Our analysis suggests that a firm located in a large (or rich) country is the likely market leader at the trade equilibrium. This outcome might be reversed if small country firms have a strong cost advantage, transport costs are negligible, or if the large country opens its market before the small one. JEL classification: F12; F15 Keywords: Trade liberalization; Product differentiation; International trade

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Trade and relative wages: The role of supervisory function by skilled workers

Article Abstract:

The effect of trade on relative wages is examined taking into consideration some aspects of internal organization of firms, namely, the twin function of production and supervision by skilled workers. When trade is based on endowment differences, the effect of trade is greater than is predicted by the Stolper-Samuelson theorem. When trade is based on technological differences, freer trade tends to reduce the relative wages in each country in a two-country world economy. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: F11: J13 Keyword: International trade; Relative wage; Skilled workers; Unskilled workers; Supervision

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