Toronto Metropolitan University
Saggi_Kamal.pdf (626.27 kB)
Download file

Bilateral trade agreements and the feasibility of multilateral free trade

Download (626.27 kB)
online resource
posted on 2021-05-21, 17:30 authored by Kamal Saggi, Halis Murat Yildiz
We studied how the pursuit of bilateral free-trade agreements (FTAs) affects the likelihood of achieving multilateral free trade. We derive and compare the stable Nash equilibria of two games of trade liberalization: in the FTA game, each country can either form an FTA with one of its trading partners or both of them or none of them, whereas in the (restricted) No FTA game, purely bilateral FTAs are not permitted. The major result is that there exist circumstances under which the freedom to pursue (discriminatory) bilateral FTAs is necessary for achieving multilateral free trade.