Click here for search results
What's behind MERCOSUR's common external tariff?, Volume 1
Author:Olarreaga, Marcelo; Soloaga, Isidro; Winters, Alan; Date Stored:2001/04/25
Document Date:1999/11/30Document Type:Policy Research Working Paper
SubTopics:Environmental Economics & Policies; Economic Theory & Research; Markets and Market Access; Payment Systems & Infrastructure; Trade Policy; Free Trade; Trade and Regional IntegrationLanguage:English
Major Sector:(Historic)Economic PolicyReport Number:WPS2231
Sub Sectors:TradeCollection Title:Policy, Research working paper ; no. WPS 2231
Volume No:1  

Summary: The theoretical literature on trade follows two different approaches to explaining the endogenous formation of customs unions: 1) The terms-of-trade approach, in which integrating partners are willing to exploit terms-of-trade effects. Using the terms-of-trade approach, one concludes that tariffs on imports from the rest of the world should increase after the formation of a regional bloc, because the market power of the region increases and terms-of-trade externalities can be internalized in the custom union's common external tariff. As the union forms, the "domestic market" gets larger and members' international market power increases. 2) The interest group pressures (political economy) approach, in which, for example, the customs union may offer the potential for exchanging markets or protection within the enlarged market. Using this approach, one would usually conclude that tariffs for the rest of the world decline after the custom union's formation-a rationale related to free-rider effects in larger lobbying groups. It is important to recognize the forces behind the formation of customs unions. Most researchers have focused on the second approach and neglected terms of trade as a possible explanatory variable. Both rationales explain a significant share of tariff information. Results, writes the author, suggest that both forces were important in formation of the Common Market of the Southern Cone (Mercosur). Terms-of-trade effects account for between 6 percent and 28 percent of the explained variation in the structure of protection. There is also evidence that the terms-of-trade externalities among Mercosur's members have been internalized in the common external tariff.

Official Documents
Official, scanned versions of documents (may include signatures, etc.)
File TypeDescriptionFile Size (mb)
PDF 48 pagesOfficial version*3.36 (approx.)
TextText version**
How To Order
Light-Weight Documents
Lighter (less MB) documents which may or may not be the final, official version
File TypeDescriptionFile Size (mb)
PDF 42 pagesWPS22310.20

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.
** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: