Working Paper: CEPR ID: DP6607
Authors: Richard Baldwin; Frdric Robert-Nicoud
Abstract: This paper posits a formal political economy model where the principle of reciprocity in multilateral trade talks results in the gradual elimination of tariffs. Reciprocity trade talks turn each nation?s exporters into anti-protectionists at home; they lower foreign tariffs by convincing their own government to lower home tariffs. Due to the new array of political forces, each government finds it politically optimal to remove tariffs that it previously found politically optimal to impose. The one-off global tariff cut then reshapes the political economy landscape via entry and exit ? reducing the size/influence of import-competing sectors and increasing that of exporters. In the next round of trade talks governments therefore find it politically optimal to cut tariffs again. The process may continue until tariffs are eliminated.
Keywords: lobbying; multilateral trade negotiations
JEL Codes: F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reciprocity in trade negotiations (F13) | transformation of exporters into antiprotectionists (F13) |
| transformation of exporters into antiprotectionists (F13) | tariff reduction (F13) |
| initial tariff cuts (F13) | reshaping of political economy landscape (F68) |
| reshaping of political economy landscape (F68) | further tariff reductions (F15) |
| size of export sector increases due to lower foreign tariffs (F10) | political pressure to maintain protection for import-competing sectors diminishes (F14) |
| initial tariff cuts (F13) | further reductions in tariffs (F13) |