Deepening of regional integration and multilateral trade agreements

Article Abstract:

We construct a three-country, two-bloc, multi-product trade model in which tariff agreements between customs union members are binding whereas inter-bloc tariff agreements are self-enforcing. Our main objective is to explore how the liberalization of trade between customs union members (i.e. the deepening of regional integration) affects the sustainability of tariff agreements with the rest of the world (ROW). We derive conditions under which Kemp-Wan [Kemp, M.C. and H. Wan, Jr., 1976, An elementary proposition concerning the formation of customs unions, Journal of International Economics 6, 95-97] adjustments in the external tariffs of union members result in self-enforcing tariff agreements with ROW and then use these adjustments to evaluate the general tariff-setting incentives of the two trading blocs. [C] 2001 Elsevier Science B.V. All rights reserved. Keywords: Regional integration; Sustainable tariff agreements; Kemp-Wan tariff adjustments; Europe `1992' JEL classification: F02; F13; F15

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Administered protection for workers: an analysis of the trade adjustment assistance program

Article Abstract:

One of the strongest justifications for the existence of the trade adjustment assistance (TAA) program is that it reduces workers' lobbying efforts against trade liberalization. This paper tests the proposition that the government uses TAA to compensate workers for lost tariff protection. Consistent with this argument, a decline in tariffs over the previous year raises workers' chances of receiving adjustment assistance in some specifications of the model. Equity and efficiency considerations also affect whether workers receive adjustment assistance. Workers from industries with high tariffs, high unemployment rates, and low wages are more likely to be approved for trade adjustment assistance. [C] 2001 Elsevier Science B.V. All rights reserved. Keywords: Trade adjustment assistance; Tariffs; Protection JEL classification: FO

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Foreign direct investment and spillovers through workers' mobility

Article Abstract:

We analyze a model where a multinational firm can use a superior technology in a foreign subsidiary only after training a local worker. Technological spillovers from foreign direct investment arise when this worker is later hired by a local firm. Pecuniary spillovers arise when the foreign affiliate pays the trained worker a higher wage to prevent her from moving to a local competitor. We study conditions under which these spillovers occur. We also show that the multinational firm might find it optimal to export instead of investing abroad to avoid dissipation of its intangible assets or the payment of a higher wage to the trained worker. [C] 2001 Elsevier Science B.V. All rights reserved. Keywords: Multinational corporations; Externalities; Spillovers; Training; Labor mobility JEL classification: F23; J63; O12

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