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Journal of Economic Integration 1999 September;14(3) :419-431.
DOI: https://doi.org/10.11130/jei.1999.14.3.419
Endogenous Preferential Trade Agreements
Sánchez de Paz
Novo Peteiro
José Antonio and 
Méndez Naya 
Universidade da Coruña
Copyright ©1999 Journal of Economic Integration
ABSTRACT
This paper shows that preferential trade agreements can emerge in an endogenous way. We use a simple international trade model where governments fix their tariffs in order to maximize social welfare. We find that when countries behave in a non co-operative way this performance leads to tariff discrimination. This result holds whether firms play a Cournot strategy or whether they follow a Stackelberg 's leader-follower strategy. This paper also analyzes whether multilateralism and regionalism are complementary or substitutive processes. It is concluded that, in spite of the fact that absolute protection is reduced as a result of the economic integration process, relative protection against the rest of the world increases and, therefore, the two processes should not be considered as complementary.
Keywords: E
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