We show that plurilateral agreements facilitate global tariff liberalization by creating an MFN-based margin of cooperation that leaves preferential access via preferential trade agreements (PTAs) unchanged. In a model of endogenous trade agreement formation with farsighted governments, PTAs become rigid once exclusion or free-riding incentives bind, constraining further PTA expansion. Plurilateral agreements relax these constraints by allowing countries to liberalize selectively in a differentiated-goods sector without altering existing PTAs. As a result, the stable equilibrium trade network consists of the PTAs that would arise absent plurilaterals, augmented--but not replaced--by plurilateral MFN liberalization. This mechanism provides an explanation for the growing role of sectoral plurilateral agreements within the WTO as preferential liberalization becomes increasingly constrained.
Do countries gain more by liberalizing trade together than alone? We study the WTO's 2016 Phase II expansion of the Information Technology Agreement (ITA), which eliminated tariffs on products covering roughly 12% of world goods trade. Using triple-difference structural gravity, importer - product market access rose by 4-6%. Decomposition reveals nearly half reflects general-equilibrium coordination spillovers—exceeding contributions from direct tariff cuts or reduced policy uncertainty. Exploiting variation in coalition size, spillovers turn positive once participants span about two-thirds of world imports - well below the 80% critical-mass benchmark commonly assumed for plurilaterals. Conditional general equilibrium counterfactuals show ITA Phase II reduced members' import price indexes by 1.4 percentage points on average, peaking near 2.0 percentage points by 2019. Joint liberalization yields benefits beyond the sum of individual actions - evidence of the force of many.
In this paper, we study the stability of trade policy arrangements under different regulatory scenarios. Unlike previous papers, we consider an extensive set of trade policy arrangements and unlimited farsightedness of negotiating parties. In the standard three-country setup, global free trade (GFT) is uniquely stable under symmetric endowments. When two countries are small (large), the availability of Preferential Trade Agreements decreases (increases) the stability of GFT. Furthermore, in equilibrium strategic complementarity between Customs Unions (CUs) and Free Trade Agreements (FTAs) can ensure GFT stability. As asymmetry increases, GFT becomes unattainable, and the MFN regime is the only stable outcome without PTAs.
Based on the Protection for Sale approach of Grossman and Helpman (1994), we develop a theoretical model in which exogenously organised groups provide political contributions to influence trade policy. The incumbent government cares about contributions yet simultaneously takes into account the potential reactions of voters. We formally consider citizens' voting decisions, assuming they have heterogeneous ignorance thresholds, and explicitly derive the objective function of the policy-maker. We find that the resulting equilibrium structure of protection differs from the standard case. Free trade obtains only if no group lobbies and ignorance levels are the same. On average, more ignorant groups will have lower (if any) protection from the policy-maker and, also, groups represented by lobbies will not always be supported by the incumbent government.
This paper extends Harsanyi's Impartial Observer Theorem by introducing Knightian Uncertainty in the form of individual belief systems. It features an axiomatic framework of societal decision-making in the presence of individual uncertainty. The model allows the analysis of scenarios where individuals agree on the ranking but not on the likelihood of social outcomes. The preferences of the impartial observer are expressed by a weighted sum of utilities - each representing individual preferences with different belief systems. To incorporate common criticism of the framework of Harsanyi (1953), our approach is based on the generalized version by Grant et al. (2010). The belief systems are introduced as second-order beliefs following Seo (2009).
Adão et al. (2023) show that redistributive trade protection significantly contributes to US tariff variation and results in substantial monetary transfers among US individuals. This effect is primarily driven by differences in the revealed weights decision-makers assign to various sectors. We construct a political economy model for trade policy determination, incorporating workers' sectoral mobility capacity, and test whether this variable plays a crucial role in trade policy decisions. Within the United States context, for the 1996-1999 period, we demonstrate that the government prioritized protecting sectors with lower sectoral mobility capacity.
In the context of inclusive plurilateral cooperation, where bound Most-Favored-Nation (MFN) tariffs are reduced to zero as in Information technology Agreement, we investigate the evolution of global supply chain networks. This form of cooperation enables us to identify various pathways through which inclusive multilateral liberalization can impact the development of global production networks. By contrasting supply chain networks under plurilateral cooperation with those governed by deep free trade agreements, we can discern the effects of inclusive liberalization. Furthermore, the fact that plurilateral cooperation is implemented through international agreements with zero bound MFN tariffs allows us to pinpoint the effects of trade policy uncertainty on global production networks. We consider employing the dynamic graph neural networks model to construct a counterfactual.
Free trade agreements allow members to trade freely among themselves while setting individual tariffs for other countries. In contrast, customs unions involve trade liberalization among members and coordinated external tariffs. Existing models often struggle to include common external tariff constraints, a crucial issue. In theoretical models, it has been widely documented that a customs union has a welfare advantage over a free trade agreement (see Facchini et al. (2013)). As a means of reconciling the welfare advantages of CU with its empirical scarcity, political problems have been considered. We think that a proper accounting of common tariff restrictions may be able to resolve the problem. Therefore, We are developing a minimal full competition general equilibrium model that adequately accounts for the effects of common tariff restriction under a customs union.
Over the past few decades, average MFN tariffs have declined significantly, but not uniformly across sectors. High MFN tariffs persist in agriculture and some manufacturing. Article XXIV of GATT permits FTAs and CUs when import taxes and regulations are eliminated on most trade within a reasonable time. However, high-tariff sectors often maintain these tariffs post PTA formation. Over 66% of tariffs above 15% MFN rates remain unchanged in PTAs, making preferential rates no lower than MFN rates. We employ machine learning tools for textual analysis of PTAs and standard econometric methods to understand this phenomenon.
We examined how FDI ownership restrictions affect the wholesale and retail trade sectors in Jordan.
Under this project, I have developed a tax expenditure calculation methodology for Georgia and used it to calculate tax expenditures.
Under this project, I have estimated the costs associated with the introduction of various employment mechanisms in Georgia.
Under this project, I have constructed a dynamic general equilibrium model, calibrated it for the Georgian economy, and analyzed a counterfactual scenario for the introduction of Estonian corporate income tax (CIT) in Georgia. The Estonian CIT model has been in force since January 1, 2017.
This was a joint project with economists from China in which we estimated the effects of the potential Free Trade Agreement (FTA) between Georgia and China. The FTA agreement has been in force since January 1, 2018.