Publication Type
Journal Article
Version
acceptedVersion
Publication Date
3-2007
Abstract
WTO rules prohibit “disguised protection” in the form of domestic policies. How then do governments cooperate over trade and domestic policies when none can verify whether a nation's domestic tax reduction is a protective measure or a reaction to a production externality? In this paper, each government privately observes whether a production externality associated with its import-competing good is high or low. This paper finds that in an optimal agreement, disguised protection with domestic policies is never used by governments with a high externality, and is never commonly realized. Moreover, in an optimal agreement, tariffs may be conditional on domestic policies.
Keywords
Trade agreement, Private information, Domestic policy, Disguised protection
Discipline
International Economics
Research Areas
Applied Microeconomics
Publication
Journal of International Economics
Volume
71
Issue
1
First Page
241
Last Page
259
ISSN
0022-1996
Identifier
10.1016/j.jinteco.2006.05.002
Publisher
Elsevier
Citation
LEE, Gea Myoung.
Trade Agreements with Domestic Policies as Disguised Protection. (2007). Journal of International Economics. 71, (1), 241-259.
Available at: https://ink.library.smu.edu.sg/soe_research/78
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jinteco.2006.05.002