WHO WILL BE CALLED PARTNER? AN IMPORTING COUNTRY'S INCENTIVE TO FORM A FREE TRADE AREA
1993 年 44 巻 4 号 p. 289-310
詳細
1993 年 44 巻 4 号 p. 289-310
The present paper clarifies an importing country's choice of a partner for a free trade area (FTA) formation in imperfect competition. Before FTA formation, the importing country is unable to impose the higher tariff on the imports from the exporting country with the lower marginal cost for preventing the outflow of monopoly rent under the“most favored nation”constraint of the GATT. However by choosing to form a FTA with the exporting country with the greater marginal cost, the importing country can undertake tariff discrimination (though incomplete) to enhance its welfare. But it definitely reduces the world production efficiency.
