Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach
NBER Working Paper No. 9631
Using the menu-auction approach to endogenous determination of tariffs and allowing additionally for lobby formation itself to be endogenous, this paper analyzes the impact of unilateral trade liberalization by one country on its partner's trade policies. We find that such unilateral liberalization may induce reciprocal tariff reductions by the partner country. Intuitively, unilateral liberalization by one country has the effect of increasing the incentives for the export lobby in the partner country to form and to lobby effectively against the import-competing lobby there for lower protection.
Published: Krishna, Pravin and Devashish Mitra. "Reciprocated Unilateralism In Trade Policy," Journal of International Economics 65(2) 461-487, March 2005