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Harmonizing external quotas in an FTA: a step backward?

Author: De Melo, J. ; Cadot, Olivier ; Olarreaga, M.INSEAD Area: Economics and Political Science Series: Working Paper ; 98/75/EPS Publisher: Fontainebleau : INSEAD, 1998.Language: EnglishDescription: 19 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: This paper explores how political-economy forces shape quantitative barriers against the rest of the world in an FTA. The authors whow that whereas the dilution of lobbying power in an FTA typically leads to a relaxation of external quotas, this result is likely to be overturned as integration deepens. In particular, they show that cooperation among member countries on the level of their external quotas, cross-border lobbying by import-competing interests in the free-trade area, and the consolidation of national external quotas into a single one, all lead to stiffer restrictions against imports from the rest of the world. They also show tat unlike tariffs, endogenous quotas are not crucially affected by the presence of rules of origin.
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This paper explores how political-economy forces shape quantitative barriers against the rest of the world in an FTA. The authors whow that whereas the dilution of lobbying power in an FTA typically leads to a relaxation of external quotas, this result is likely to be overturned as integration deepens. In particular, they show that cooperation among member countries on the level of their external quotas, cross-border lobbying by import-competing interests in the free-trade area, and the consolidation of national external quotas into a single one, all lead to stiffer restrictions against imports from the rest of the world. They also show tat unlike tariffs, endogenous quotas are not crucially affected by the presence of rules of origin.

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