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Trade negotiations, domestic policies, and the Most Favored Nation clause

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This paper illustrates how restricting trade instruments to non-discrimination links trade agreements to non-trade agreements and, under certain conditions, helps governments further lower tariffs and/or domestic standards (policies). These conditions are: (i) governments' objective functions are sufficiently concave with respect to domestic standards (policies); (ii) domestic standards are sufficiently valued; and (iii) policies are strategic complements. These can then be used as a rationale for restricting safeguard measures to non-discrimination.
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Keywords: F02; F13; F18

Document Type: Research Article

Affiliations: Faculty of Industrial Engineering and Management, The Technion

Publication date: 2008-08-01

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