Cross-border lobbying in preferential trading agreements: Implications for external tariffs and welfare
Review of International Economics
This paper examines the effect of cross-border lobbying on domestic lobbying and on external tariffs in both Customs Union (CU) and Free Trade Area (FTA). We do so by developing a two-stage game which endogenizes the tariff formation function in a political economic model of the directly unproductive rent-seeking activities type. We find that cross-border lobbying un-ambiguously increases both domestic lobbying and the equilibrium common external tariffs in a CU. The same result also holds for FTA provided tariffs for the member governments are strategic complements. We also develop a specific oligopolistic model of FTA and show that tariffs are indeed strategic complements in such a model.
Bandyopadhyay, Subhayu; Lahiri, Sajal; and Wall, Howard J., "Cross-border lobbying in preferential trading agreements: Implications for external tariffs and welfare" (2012). Faculty Scholarship. 251.