Abstract
The GATT/WTO Article XXIV prevents a customs union (CU) from raising its common external tariff. In this paper, we compare CU formation with and without this Article XXIV constraint. We show, in a multi-country oligopoly model, that for a given CU structure, Article XXIV improves world welfare by lowering trade barriers. However, we also show that Article XXIV has a composition effect on CU formation: it affects the endogenous choice of CUs. By encouraging more symmetric CUs, Article XXIV causes more trade to be subject to trade barriers. As a result, Article XXIV may be 'bad' for world welfare.
| Original language | English |
|---|---|
| Pages (from-to) | 216-232 |
| Number of pages | 17 |
| Journal | Journal of International Economics |
| Volume | 89 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Jan 2013 |
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