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Type: Journal article
Title: MFN status and the choice of tariff regime
Author: Hashimzade, N.
Khodavaisi, H.
Myles, G.
Citation: Open Economies Review, 2011; 22(5):847-874
Publisher: Springer
Issue Date: 2011
ISSN: 0923-7992
Statement of
Nigar Hashimzade, Hassan Khodavaisi, Gareth D. Myles
Abstract: The gradualist approach to trade liberalization views the uniform tariffs implied by MFN status as an important step on the path to free trade. We investigate whether a regime of uniform tariffs will be preferable to discriminatory tariffs when countries engage in non-cooperative interaction in multilateral trade. The analysis includes product differentiation and asymmetric costs. We show that with the cost asymmetry the countries will disagree on the choice of tariff regime. When the choice of import tariffs and export subsidies is made sequentially the uniform tariff regime may not be sustainable, because of an incentive to deviate to a discriminatory regime. Hence, an international body is needed to ensure compliance with tariff agreement.
Keywords: MFN clause; Product differentiation; Discriminatory tariffs
Rights: © Springer Science+Business Media, LLC 2010
DOI: 10.1007/s11079-010-9178-9
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