DP908 The Politics of Free Trade Agreements

Author(s): Gene M. Grossman, Elhanan Helpman
Publication Date: January 1994
Keyword(s): Free Trade Agreement, Political Economy, Regional Integration, Trade Policy
JEL(s): D78, F13, F15
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=908

Suppose that an opportunity arises for two countries to negotiate a free trade agreement (FTA). Will an FTA between these countries be politically viable? If so, what form will it take? We address these questions using a political economy framework that emphasizes the interaction between industry special interest groups and an incumbent government. We describe the economic conditions necessary for an FTA to be an equilibrium outcome, both for the case when the agreement must cover all bilateral trade and when a few, politically sensitive sectors can be excluded from the agreement.