Negotiating Free Trade

Philippe Aghion, Pol Antràs, Elhanan Helpman

NBER Working Paper No. 10721
Issued in September 2004
NBER Program(s):   ITI

We develop a dynamic bargaining model in which a leading country endogenously decides whether to sequentially negotiate free trade agreements with subsets of countries or engage in simultaneous multilateral bargaining with all countries at once. We show how the structure of coalition externalities shapes the choice between sequential and multilateral bargaining, and we identify circumstances in which the grand coalition is the equilibrium outcome, leading to worldwide free trade. A model of international trade is then used to illustrate equilibrium outcomes and how they depend on the structure of trade and protection. Global free trade is not achieved when the political-economy motive for protection is sufficiently large. Furthermore, the model generates both building bloc' and stumbling bloc' effects of preferential trade agreements. In particular, we describe an equilibrium in which global free trade is attained only when preferential trade agreements are permitted to form (a building bloc effect), and an equilibrium in which global free trade is attained only when preferential trade agreements are forbidden (a stumbling bloc effect). The analysis identifies conditions under which each of these outcomes emerges.

download in pdf format
   (555 K)

email paper

This paper was revised on December 11, 2006

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10721

Published: Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, vol. 73(1), pages 1-30, September. citation courtesy of

Users who downloaded this paper also downloaded these:
Grossman and Helpman w11396 Party Discipline and Pork Barrel Politics
Baldwin and Jaimovich w16084 Are Free Trade Agreements Contagious?
Baldwin w12545 Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade
Antràs and Staiger w14285 Offshoring and the Role of Trade Agreements
Ben-David and Loewy w6095 Free Trade, Growth, and Convergence
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us