Abstract:
The GATT/WTO Article XXIV prevents a customs union (CU) from raising its common external tariff. In this paper, we compare CU formation with and without this Article XXIV constraint. We show, in a multi-country oligopoly model, that for a given CU structure, Article XXIV improves world welfare by lowering trade barriers. However, we also show that Article XXIV has a composition effect on CU formation: it affects the endogenous choice of CUs. By encouraging more symmetric CUs, Article XXIV causes more trade to be subject to trade barriers. As a result, Article XXIV may be ‘bad’ for world welfare.
Citation:
Mrázová, M., Vines, D., & Zissimos, B. (2013), 'Is the GATT/WTO’s Article XXIV bad? ', Journal of International Economics, Vol. 89, Issue 1, pp. 216–232, Elsevier BV, https://doi.org/10.1016/j.jinteco.2012.07.007