5th Institutions Trade & Economic Development (InsTED) Workshop: Principle of Reciprocity in the 21st Century

Description

Workshop presentation

In modern trade environments with offshoring and politically powerful firms,
governments have reason to use trade agreements to expand export volumes
beyond what would be expected from standard trade agreement models. In such
a setting, we characterize the outcome of rules-based trade negotiations
according to WTO principles. The outcome yields new predictions that are
consistent with empirical evidence concerning cooperative tariffs under the
WTO and governments' attempts to deviate from the cooperative\ equilibrium
of the WTO. Exporters with greater political power and larger supply
elasticities compel greater reductions in cooperative import tariffs through
trade negotiations --- reductions so large that losses to domestic firms
from import competition outweigh gains to consumers. Unlike the standard
model's cooperative equilibrium in which a government can gain only by
improving its terms of trade, a government here will seek to improve
outcomes for the losing import-competing firms by imposing disguised
protection and discouraging foreign export subsidies.

Period	May 2018
Held at	Syracuse University, United States, New York