Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 06-2004: Non-Preferential Trading Clubs

Pascalis Raimondos-Møller and Alan D. Woodland
Additional contact information
Pascalis Raimondos-Møller: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Alan D. Woodland: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

Abstract: This paper examines the welfare implications of non-discriminatory tariff reforms by a subset of countries, which we term a non-preferential trading club. We show that there exist coordinated tariff reforms, accompanied by appropriate income transfers between the member countries, that unambiguously increase the welfare of these countries while leaving the welfare of non-members unaltered. In terms of economic policy implications, our results show that there exist regional, MFN-consistent arrangements that lead to Pareto improvements in world welfare.

Keywords: Trading clubs; non-preferential tariff reform; Kemp-Wan-Ohyama proposition

JEL-codes: F15

29 pages, August 28, 2006

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