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From the collective choice perspective, this paper examines how different trade regimes have differing implications for two enemy countries' arming decisions in a three-country world with a neutral third-party state. We compare the two adversaries' aggregate arming (i.e., overall conflict intensity) and show that it is in ascending order for the following regimes: (i) a free trade agreement (FTA) between the adversaries, leaving the third-party state as a non-member, (ii) worldwide free trade in the presence of the interstate conflict, (iii) trade wars with Nash tariffs, and (iv) an FTA between the third country and one adversary, excluding the other adversary from the trade bloc. These results have policy implications for interstate conflicts. First, “dancing between two enemies” with an FTA results in lower aggregate arming than under worldwide free trade. Second, the world is “more dangerous” in tariff wars than under free trade. Third, an FTA between one adversary and the third party while keeping the other adversary as an outsider is conflict-aggravating since aggregate arming is the highest compared to all other trade regimes. We also analyze aggregate arming under a customs union (CU) and discuss differences/similarities in implications between a CU and an FTA for interstate conflicts.

In a three-country model of endogenous trade agreements, we study the implications of the most-favoured-nation (MFN) clause when countries are free to form discriminatory preferential trade agreements (PTAs). Under current rules of the World Trade Organization (WTO), although non-member countries face discrimination at the hands of PTA members, they themselves are obligated to abide by MFN and treat PTA members in a non-discriminatory fashion. The non-discrimination constraint of MFN reduces the potency of a country’s optimal tariffs and therefore its incentive for unilaterally opting out of trade liberalization. Thus, MFN can act as a catalyst for trade liberalization. However, when PTAs take the form of customs unions, the efficiency case for MFN as well as its pro-liberalization effect is weaker because one country finds itself deliberately excluded by the other two as opposed to staying out voluntarily. Nous étudions, dans un modèle à trois états d’accords commerciaux endogènes, les conséquences d’une clause de la nation la plus favorisée (NPF) dans un scénario où les pays sont libres de conclure des accords commerciaux préférentiels (ACP) discriminatoires. En vertu des règles en vigueur de l’Organisation mondiale du commerce (OMC), même si les états non membres subissent de la discrimination de la part des membres d’ACP, ils doivent tout de même se conformer à la clause de la NPF et traiter les membres d’ACP sans discrimination. Les obligations de non-discrimination de la NPF réduisent le poids des tarifs optimal d’un état et, du coup, sa motivation à se désister unilatéralement de la libéralisation du commerce. Ainsi, la clause de NPF peut avoir un effet catalyseur sur la libéralisation du commerce. Or, lorsque les ACP se présentent sous la forme d’unions douanières, le poids de l’efficacité d’une clause de NPF et ses effets favorisant la libéralisation sont affaiblis du fait qu’un état est délibérément exclu par les deux autres, plutôt que de pouvoir se désister volontairement.

We examine the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation (MFN) tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. We find that preferential tariff reduction in a given sector leads to a reduction in the external (MFN) tariff in that sector. External liberalization is greater if preferences are granted to important suppliers. However, these \"complementarity effects\" of preferential liberalization on external liberalization do not arise in customs unions. Overall, our results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded.

The exit of the United Kingdom from the European Union (EU) single market and customs union has adversely affected trade prospects of many developing economies that depended on the UK market for their exports. This paper investigates the impact of Brexit on African countries' exports to the UK. The comparison is based upon trade between the set of African countries which export most to the UK and the EU. It provides a quantitative assessment of the trade effect through the use of descriptive analysis and empirical estimations by employing the difference-in-difference (DID) estimation approach. The descriptive analysis finds that the share of African exports sent to the UK has declined since the Brexit announcement in 2016. The empirical estimations using the DID approach also demonstrate a drop of 20–30% in African countries exports to the UK relative to the EU-27 in this period. These results hold to a battery of robustness checks, including the use of an alternative estimation approach, varying sample size, and the use of alternative counterfactuals. We further show that the trade flows started to drop immediately after the announcement of the Brexit referendum in 2015 but the main drop came after the Brexit referendum results became evident. These findings imply the need for policy intervention and support for African countries to revitalize their trade flows and alleviate the unintended effects of this trade shock.

Previous work in the literature on regional economic integration has proposed the use of machine learning algorithms to evaluate the composition of customs unions, specifically, to estimate the degree to which customs unions match “natural markets” arising from trade flow data or appear to be driven by other factors such as political considerations. This paper expands upon the static approaches used in previous studies to develop a dynamic framework that allows to evaluate not only the composition of customs unions at a given point in time, but also changes in the composition over time resulting from accessions of new member states. We then apply the dynamic algorithm to evaluate the evolution of the global landscape of customs unions using data on bilateral trade flows of 200 countries from 1958 to 2018. A key finding is that there is considerable variation across different accession rounds of the European Union as to the extent to which these are aligned with the structure of “natural markets,” with some accession rounds following more strongly a commercial logic than others. Similar results are also found for other customs unions in the world, complementing the insights obtained from static analyses.

This article offers the justification for a type of carbon customs union in which countries with a diverse range of high-ambition domestic climate measures would adopt a common external tariff on carbon intensive imports from countries outside the union. We explain why any pragmatic approach to carbon border measures (CBMs) is likely to create problems under prevailing interpretations of the World Trade Organization's (WTO) primary rules. Given the urgency of the climate crisis and the fact that the legality of a CBM – no matter how designed – will be a question of first impression for any WTO dispute panel, WTO consistency should take a backseat to considerations of domestic legal and political feasibility in designing a CBM. Instead of trying to fit a CBM into current understandings of WTO rules, WTO members should renegotiate WTO rules to permit a range of aggressive, but likely trade-restrictive, decarbonization measures. Having said that, we also recognize that WTO negotiations may take longer than optimal from a decarbonization standpoint. We therefore suggest an approach that would allow WTO members to take advantage of flexibilities that existing WTO rules afford.

This study examines the regional impacts of agricultural trade liberalization between Türkiye and the European Union (EU), which has been excluded from their Customs Union since 1996. Motivated by recent diplomatic progress toward expanding the Customs Union to include agriculture, we employ a Multi-Regional Turkish Computable General Equilibrium (CGE) model to simulate the effects of reducing tariffs and non-tariff barriers (NTBs) by 50% (moderate scenario) and 90% (ambitious scenario). Our findings reveal significant regional disparities: while regions like the Mediterranean and Aegean stand to gain from enhanced market access, others such as Central and East Anatolia may face intensified competition from EU imports. Urban centers, notably Istanbul and Izmir, are projected to benefit from lower consumer prices, improving the affordability of agricultural products. Importantly, no region is expected to experience welfare losses; in fact, areas like Southeast Anatolia may see considerable welfare gains. These results underscore the necessity for strategic policies that align with EU standards and bolster regional competitiveness to fully harness the benefits of trade liberalization and promote equitable development across Türkiye's diverse regions.

Countries are increasingly using free trade agreements (FTAs) and customs unions (CUs) to cooperate on environmental issues by including environmental provisions in regional trade agreements (RTAs). We examine whether countries form RTAs with regional environmental regulations and join a multilateral trade agreement (MTA) with a common environmental regulation that maximizes world welfare. Each government imposes an environmental tax to mitigate negative externalities caused by the consumption of differentiated goods. The main finding is that a deep FTA with regional harmonization of environmental taxes may act as a stumbling block for an MTA with multilateral harmonization of environmental taxes if the degree of product differentiation is intermediate. In contrast, a deep CU with a regional environmental tax serves as a building block, even if negative consumption externalities are transboundary.

Joining the European Union has been a long-lasting priority in Turkish foreign policy and one which has fluctuated from relatively short episodes of hope to longer periods of frustration or even despair. The article reviews the intensity, drivers and justification of change during five critical periods: the 1959 application for association that led to the signature in 1963 of the Treaty of Ankara; the request for full membership in 1987 that led to the signature of the Customs Union in 1995; the Helsinki decision in 1999 to grant Turkey candidate status; the unenthusiastic opening of the accession negotiations in 2005; and the gradual evolution toward a transactional cooperation ever since, which coexists with signs of an increasingly adversarial relationship. Foreign policy changes in Turkey are one of the factors explaining the evolution of this relationship. This article emphasizes the need to take into consideration foreign policy changes in the EU and within some of its member states, as well as global and regional transformations. It also points out the extraordinary resilience of EU-Turkey relations, and how pragmatic, ideational and normative arguments have so far contributed to avoidance of an abrupt divorce.

The Common External Tariff (CET) of the East African Community (EAC) customs union has long been considered the cornerstone of the most successful example of regional integration in Sub-Saharan Africa. In this paper, we assess the implementation of the EAC-CET using a novel dataset of country- and firm-level deviations from the common tariff regime constructed by digitizing information in gazettes published by the Secretariat of the EAC between 2009 and 2019. Employing these data, we present five patterns on EAC tariff policy: (i) increased usage of country-level deviations from the common tariff regime render the EAC-CET less and less ‘common’; (ii) Kenya, Tanzania, and Uganda predominantly use unilateral deviations to increase external protection while Rwanda mostly decreases tariffs; (iii) Kenya, Tanzania, and Uganda increase tariffs for the same classes of products, but target different industries; (iv) unilateral tariff reductions at the country level are mostly used to facilitate access to inputs; (v) data on firm-level exemptions suggest that private sector development in the EAC would benefit from lower tariffs on intermediate inputs. Our findings demonstrate an incipient but clear trend in the EAC away from a communal tariff regime and towards national and more protectionist trade policies.