A puzzle in the analysis of trade policy is why free trade outcomes, which maximize world income, are not more often observed. One reason is that economics agents with special interests affect both the form and level of international protective policies. This paper investigates the dynamic...

Structural reforms, whereby organized groups lose their power to extract rents, tend to occur in bad times rather than during prosperous times. We present a model where rent-seeking leads to economic decline, which, in turn, will make a future reform inevitable when times will be bad enough....

In an environment where international trade agreements must be enforced via promises of future cooperation, the presence of an import-competing lobby has important implications for optimal punishments, and therefore dispute resolution procedures. When lobbies work to disrupt trade agreements,...

This report provides a conceptual foundation for the analysis of international regulatory co-operation (IRC) and its potential benefits through reduced trade costs. Different forms of IRC aiming to reduce specification, conformity assessment and information costs - which can arise from...

When governments impose a quota or tariff on imports, it is well known that the resulting rents and revenues trigger costly rent-seeking and revenue-seeking activities, which are welfare-reducing and may be economically more significant than the efficiency losses resulting from the...

We show that global trade negotiations can prevent global free trade. In a simple model where global tariff negotiations precede sequential Free Trade Agreement (FTA), we show FTA formation can expand all the way to global free trade in the absence of global tariff negotiations but global free...

This paper studies whether it is possible to characterize an optimal, time-consistent tariff to protect an infant-industry in the presence of learning effects. A domestic monopolist decides how much to produce, taking into account learning effects induced by its current production, while the...

We analyze an infinitely repeated tariff-setting game played by two large countries with alternating moves. We focus on the subgame perfect equilibria in which each country chooses its tariff according to a stationary function of the other country's tariff. We show that there are many equilibria...

Governments routinely practice binding overhang by setting applied tariffs below their binding WTO commitments. We explain this phenomenon using a dynamic theory of lobbying. The government is captured by import-competing industries (or exporters), whose applied tariff concessions in response to...

This paper focuses on the impact of hidden information on strategic interaction in the context of trade agreements. In the presence of informational asymmetry it is possible that a tradeoff between liberalization and sustainability of cooperation emerges. It is shown that it may be optimal to...