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The Regionalization of the World Economy$
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Jeffrey A. Frankel

Print publication date: 1997

Print ISBN-13: 9780226259956

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226260228.001.0001

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Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA

Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA

(p.227) 8 Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA
The Regionalization of the World Economy

Carsten Kowalczyk

Donald Davis

University of Chicago Press

Article XXIV of the General Agreement on Tariffs and Trade constitution deems admissible customs unions and free trade areas that eliminate duties on “substantially all the trade” between the partners and that apply extra-club duties that are “not on the whole...higher or more restrictive” than the initial duties. The latter of these conditions aims at preventing clubs from forming for the purpose of extracting better terms of trade from outsiders through the use of higher external tariffs by club members. This chapter first reviews the theoretical literature with particular emphasis on results on world economic welfare. It then discusses global and preferential tariff phase-outs from both a theoretical and an empirical perspective. In particular, it examines the agreed U.S. and Mexican North American Free Trade Agreement phase-outs and discusses how they might be explained from the perspective of bargaining between two governments responding to different domestic pressures and environments. It also presents a historical discussion of phase-outs both in the context of global trade negotiation rounds and with respect to Article XXIV.

Keywords:   tariffs, General Agreement on Tariffs and Trade, tariff phase-outs, North American Free Trade Agreement, trade negotiation, Article XXIV, economic welfare, customs unions

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