| UTR vs. CU Formation: The Missing CET |
Ali M. El-Agraa, Anthony J. Jones |
Fukuoka University
University of Leeds |
| Copyright ©2000 Journal of Economic Integration |
| ABSTRACT |
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In 1965, Cooper and Massell (CM), using a partial-equilibrium trade model, reached the conclusion that a policy of unilateral tariff reduction (UTR) is superior to the formation of a customs union (CU). Wonnacott and Wonnacott (WW) challenged this conclusion in 1981 by claiming to show that UTR need not dominate a CU. In this article, we demonstrate that the incorporation of a common external tariff in WW?s CU model not only restores the validity of CM?s conclusion but also leads to the new proposition that the mutual adoption of non-discriminatory free trade policies is superior to UTR. (JEL Classifications: F13, F02) |
| Keywords:
Ta r i ffs | Customs Unions | Unilateral Policies
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| REFERENCE |
| 1. |
El-Agraa, A. M. [1979a], "On Optimum Tariffs, Retaliation and International Cooperation," Bulletin of Economic Research 31; pp. 46-53. |
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| 2. |
El-Agraa, A. M. [1979b], "On Tariff Bargaining," Bulletin of Economic Research 31; pp. 100-3. |
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