Abstract
This paper shows that Non-Tariff Measures (NTMs) may fully respect the non-discrimination principle of the WTO and still act as a protectionist device. NTMs that raise the costs of all firms induce some exit and thus reallocate market shares towards the most efficient firms. The paper analyzes when this mechanism generates protectionism. Introducing political economy motives in the model, this paper shows that trade liberalization increases the use of NTMs in the non-cooperative equilibrium. Moreover, a trade agreement may be welfare reducing if governments only care about the most efficient firms. A Pareto improving trade agreement may require an international income redistribution between countries if the firm productivity distribution differs across countries. These results may help explaining why recent trade negotiations face increasing opposition.
Keywords
Trade protection; Non-discrimination; WTO; domestic regulations;
JEL codes
- F12: Models of Trade with Imperfect Competition and Scale Economies • Fragmentation
- F13: Trade Policy • International Trade Organizations
- F02: International Economic Order
Replaces
Vincent Rebeyrol, “Protection without Discrimination”, TSE Working Paper, n. 20-1131, August 2020, revised April 2023.
Replaced by
Vincent Rebeyrol, “Protection without Discrimination”, TSE Working Paper, n. 20-1131, August 2020, revised April 2023.
Reference
Vincent Rebeyrol, “Protection without Discrimination”, TSE Working Paper, n. 20-1131, August 2020, revised April 2023.
See also
Published in
TSE Working Paper, n. 20-1131, August 2020, revised April 2023