FTAs for Global Free Trade: Through Trade Liberalization Game

• 발행기관: 한국무역학회
• 저자명: Sihoon Nahm
• 간행물 정보: 『Journal of Korea Trade (JKT)』Vol.26 No.1, 33~56쪽, 전체 24쪽
• 주제분류: 경제경영 > 무역학
• 파일형태: PDF
• 발행일자: 2022.02.28

영문 초록

Purpose – This paper explains how free trade agreements (FTAs) work as a building block to achieve global free trade and be better than other trade regimes. Design/methodology – This paper utilizes a trade liberalization game setup. Three countries choose a trade agreement strategy based on a given trade regime. Trade agreement is made only when all member countries agree. The paper evaluates each trade regime concerning FTAs and customs union (CU) by area size of global free trade equilibrium on the technology or demand gap between countries. Findings – FTAs make global free trade easier. In this game, there are two main reasons for failure to reach global free trade. First, a trade regime with FTAs makes non-member face difficulties in refusing trade agreements in the existence of a technology gap than a trade regime without FTAs. Also, a trade regime with FTAs causes it harder to exclude non-members in the existence of a demand gap than a trade regime with only CUs. Therefore, a trade regime with FTAs can work better in reaching global free trade. Originality/value – The concept of “implicit coordination” was used, which assumes that FTA members keep external tariffs for non-members the same as before an FTA. Without this consideration, FTA members lower their tariffs to non-members, and it makes non-member refuse free trade easier. FTA can prevent it sufficiently only with implicit coordination. This makes the trade regime with FTAs more effective to reach global free trade.

목차

1. Introduction

2. Model

3. Free Riding and FTAs

4. Exclusive Bloc and FTA

5. Conclusion

키워드

Customs Union Free Trade Agreement Trade Liberalization Game