Using the influence-driven approach to endogenous trade-policy determination, we show how a free-trade agreement (FTA) with rules of origin can work as a device to compensate losers from trade liberalization. The FTA constructed in this paper is characterized by external tariff structures that...

Using an extension of the influence-driven lobbying approach developed by Grossman and Helpman, we study the impact of regional trading arrangements (RIAS) on trade policy towards non-members in a three-good, three-country model.