Political Asymmetry and Common External Tariffs in a Customs Union
30 Pages Posted: 2 Jul 2008 Last revised: 19 Jul 2010
Date Written: July 16, 2010
This paper examines the effect of political and economic asymmetries in the formation of common external tariffs (CETs) in a customs union (CU). We do so by introducing possible cross-border lobbying and by endogenizing tariff formation in a political economic model for the determination of CETs. The latter allows us to consider asymmetries among the member nations in their susceptibilities to lobbying. We also consider asymmetries in the influence of the member nations in CU-wide decision-making. A central finding of this paper is that, in the absence of economic asymmetry, the CET rises monotonically with the degree of asymmetry in country influences if the two countries are equally susceptible to lobbying. If influences are the same, the CET also rises monotonically with the degree of asymmetry in susceptibilities. These results hold irrespective of whether the lobby groups in the two member countries cooperate or work non-cooperatively.
Keywords: Asymmetry, Customs union, Common external tariff, Politics
JEL Classification: F13
Suggested Citation: Suggested Citation
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By Samia Costa