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Harmonizing External Quotas in an FTA: A Step Backward?
Author(s) -
Cadot Olivier,
De Melo Jaime,
Olarreaga Marcelo
Publication year - 2002
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/1468-0343.00108
Subject(s) - consolidation (business) , international economics , economics , rest (music) , rules of origin , international trade , external trade , politics , commercial policy , political science , law , medicine , accounting , cardiology
This paper explores how political–economy forces shape quantitative barriers against the rest of the world in an FTA. We show that whereas the dilution of lobbying power in an FTA typically leads to a relaxation of external quotas, this result is likely to be overturned as integration deepens. In particular, we show that cooperation among member countries on the level of their external quotas, cross–border lobbying by import–competing interests in the free–trade area, and the consolidation of national external quotas into a single one, all lead to stiffer restrictions against imports from the rest of the world. We also show that, unlike tariffs, endogenous quotas are not crucially affected by the presence of rules of origin.