Is the WTO's Article XXIV Bad?
This paper shows that the WTO's Article XXIV increases the likelihood of free trade, but may worsen world welfare when free trade is not reached and customs unions (CUs) form. We consider a model of many countries. Article XXIV prevents a CU from raising its common external tariff, which makes...
| Main Authors: | , , |
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2008
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| _version_ | 1826286811627913216 |
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| author | Mrazova, M Vines, D Zissimos, B |
| author_facet | Mrazova, M Vines, D Zissimos, B |
| author_sort | Mrazova, M |
| collection | OXFORD |
| description | This paper shows that the WTO's Article XXIV increases the likelihood of free trade, but may worsen world welfare when free trade is not reached and customs unions (CUs) form. We consider a model of many countries. Article XXIV prevents a CU from raising its common external tariff, which makes CU formation less attractive and explains why free trade is more likely. In an equilibrium where two CU's do form, one is necessarily larger than the other. We show that Article XXIV has a composition effect on CU formation, whereby CUs are (endogenously) less asymmetric in size so more goods are subject to tariff distortions as they move between CUs; thus Article XXIV may be 'bad' for world welfare. |
| first_indexed | 2024-03-07T01:49:16Z |
| format | Working paper |
| id | oxford-uuid:9982828e-fb70-44ba-a414-1bbf092c0ec2 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T01:49:16Z |
| publishDate | 2008 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:9982828e-fb70-44ba-a414-1bbf092c0ec22022-03-27T00:14:49ZIs the WTO's Article XXIV Bad?Working paperhttp://purl.org/coar/resource_type/c_8042uuid:9982828e-fb70-44ba-a414-1bbf092c0ec2EnglishDepartment of Economics - ePrintsDepartment of Economics (University of Oxford)2008Mrazova, MVines, DZissimos, BThis paper shows that the WTO's Article XXIV increases the likelihood of free trade, but may worsen world welfare when free trade is not reached and customs unions (CUs) form. We consider a model of many countries. Article XXIV prevents a CU from raising its common external tariff, which makes CU formation less attractive and explains why free trade is more likely. In an equilibrium where two CU's do form, one is necessarily larger than the other. We show that Article XXIV has a composition effect on CU formation, whereby CUs are (endogenously) less asymmetric in size so more goods are subject to tariff distortions as they move between CUs; thus Article XXIV may be 'bad' for world welfare. |
| spellingShingle | Mrazova, M Vines, D Zissimos, B Is the WTO's Article XXIV Bad? |
| title | Is the WTO's Article XXIV Bad? |
| title_full | Is the WTO's Article XXIV Bad? |
| title_fullStr | Is the WTO's Article XXIV Bad? |
| title_full_unstemmed | Is the WTO's Article XXIV Bad? |
| title_short | Is the WTO's Article XXIV Bad? |
| title_sort | is the wto s article xxiv bad |
| work_keys_str_mv | AT mrazovam isthewtosarticlexxivbad AT vinesd isthewtosarticlexxivbad AT zissimosb isthewtosarticlexxivbad |