Global Tariff Negotiations as a Stumbling Bloc to Global Free Trade?

By James Lake (Southern Methodist University) and Santanu Roy (Southern Methodist University)

The principle of non-discrimination lies at the heart of the WTO. GATT Article I mandates that, for a given product, a country cannot set different tariffs on different trading partners. Indeed, GATT Article I has provided the bedrock for the various rounds of global trade negotiations, including the 1994 Uruguay Round. However, GATT Article XXIV allows Free Trade Agreements (FTAs) whereby members eliminate tariffs on each other while maintaining tariffs on non-members. Thus, FTAs directly contradict the non-discrimination principle. In turn, an important and long standing issue in the FTA literature is whether FTAs help or hinder global trade negotiations. In the famous language of Jagdish Bhagwati, are PTAs “building blocs” or “stumbling blocs” to global trade liberalization?

A long literature has tackled Bhagwati’s question.[1] However, the interdependence between FTAs and global trade negotiations need not only run from FTAs to global negotiations. The process of global negotiations may also impact the process of FTA formation and, in turn, the degree of global trade liberalization. That is, the tariff concessions embedded in the Uruguay Round may have shaped the subsequent process of FTA formation and, in turn, the ultimate degree of global trade liberalization. Yet, as noted by Caroline Freund and Emanuel Ornelas in their review of the literature, the impact of global negotiations on FTAs has received surprisingly little attention in the literature.[2]

In a recent paper, we investigate how an initial round of global negotiations over tariff bindings (i.e. the upper bound on tariffs) impact the subsequent process of FTA formation in a three-country world where governments favor the interests of their import competing sector due to political economy motivations.[3] To do so, we compare the outcomes of two extensive form games that differ only because of the presence or absence of an initial round of global tariff negotiations. In the first game, global negotiations precede FTA negotiations and forward looking governments anticipate the possibility of FTA formation during global negotiations. In the second game, there are no global negotiations preceding FTA negotiations. In either game, FTA negotiations take place sequentially through a randomly chosen order. This framework generates interesting insights.

Our main result is that, when political economy motivations are not too strong, global tariff negotiations actually prevent global free trade. When global tariff negotiations precede FTA negotiations, a tariff ridden world emerges with globally negotiated tariff bindings above zero and no more than one pair of countries linked by an FTA. However, in the absence of global tariff negotiations, FTA formation continues until global free trade is attained via all pairs of countries linked through FTAs. Thus, global tariff negotiations are the cause of a world stuck short of global free trade. In other words, global tariff negotiations are a stumbling bloc to global free trade!

The driving force behind our main result is the different level of tariff concessions given by the eventual FTA non-member in the presence and absence of global tariff negotiations. In the absence of global tariff negotiations, the FTA non-member has no pre-existing tariff bindings. To gain tariff concessions from the outsider, FTA members have strong incentives to form subsequent FTAs with the non-member. Indeed, as long as government political economy motivations are not too strong, sequential FTA formation leads to global free trade. However, global negotiations produce significant tariff binding concessions by all countries before FTA negotiations. These tariff concessions obtained through forward looking global negotiations are deep enough that, upon FTA formation, FTA members no longer have any incentive for FTA formation with the non-member and global free trade does not emerge. In this sense, the success of global tariff negotiations in lowering tariffs drives our result that global tariff negotiations prevent global free trade.

From a practical standpoint, our analysis explains how globally negotiated tariffs depend on anticipations regarding future FTA formation and how binding overhang and tariff complementarity depend on political economy motivations.[4] Indeed, our analysis can shed light on the different empirical results of Antoni Estevadeordal, Caroline Freund and Emanuel Ornelas versus Nuno Limao and Baybars Karacaovali.[5] The former find empirical evidence for tariff complementarity among South American FTA members (i.e. FTA members choose to lower their tariffs on non-members after FTA formation). However, the latter find no evidence that preferential tariff liberalization begets multilateral tariff liberalization for the US and the EU. Our theoretical results suggest the former (latter) should emerge among governments with relatively strong (weak) political economy motivations. Indeed, these predictions based on political economy motivations square well with the recent cross-country empirical estimates of political economy motivations by Kishore Gawande, Pravin Krishna and Marcelo Olarreaga.[6]


Estevadeordal, A., C. Freund, and E. Ornelas (2008); “Does Regionalism Affect Trade Liberalization Toward Nonmembers?” Quarterly Journal of Economics 123(4): 1531-1575.

Freund, C. (2000); “Multilateralism and the Endogenous Formation of Preferential Trade Agreements.Journal of International Economics 52 (2): 359-376.

Freund, C. and E. Ornelas (2010); “Regional Trade Agreements.Annual Review of Economics 2(1): 139-166.

Gawande, K., P. Krishna, and M. Olarreaga (2012): “Lobbying Competition over Trade Policy.International Economic Review 53 (1), 115-132.

Karacaovali, B. and N. Limão (2008); “The Clash of Liberalizations: Preferential vs. Multilateral Trade Liberalization in the European Union.Journal of International Economics 74(2): 299-327.

Krishna, P. (1998); “Regionalism and Multilateralism: A Political Economy Approach.Quarterly Journal of Economics 113(1): 227-251.

Lake, J. and S. Roy (2017); “Are Global Trade Negotiations Behind a Fragmented World of Gated Globalization?Journal of International Economics 108, 117-136.

Limão, N. (2006); “Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States.American Economic Review 96(3): 896-914.

Ornelas, E. (2005a). “Endogenous Free Trade Agreements and the Multilateral Trading System.Journal of International Economics 67(2): 471-497.

Ornelas, E. (2005b); “Trade Creating Free Trade Areas and the Undermining of Multilateralism.European Economic Review 49 (7): 1717-1735.


[1] Some influential contributions include Krishna (1998), Riezman (1999), Ornelas (2005a,b) and Saggi and Yildiz (2010).

[2] See Freund and Ornelas (2008) for two exceptions, and see Freund and Ornelas (2010) for their review of the literature.

[3] In our paper Lake and Roy (2017), we model global tariff negotiations over tariff bindings because countries negotiate over tariff bindings rather than the actual tariffs (i.e. applied tariffs) in practice.

[4] Binding overhang is the difference between the tariff binding and the actual tariff set by a country. Tariff complementarity is the phenomenon where, upon FTA formation, the FTA members choose to lower their tariffs on non-members.

[5] Estevadeordal et. al. (2008), Limao (2006) and Karacaovali and Limao (2008).

[6] Gawande, Krishna and Olarreaga (2012).


Welcome new members – October 2017

We would like to welcome the following new members of the InsTED network:

Prof James Anderson (Boston College) His main research interests are in index numbers of trade policy and the measurement of trade barriers, and the economic theory of gravity.

Prof Roberto Bonfatti (University of Nottingham) His primary research interests are in international trade and political economy.

Prof Beata Javorcik (University of Oxford) Her research interests are in foreign direct investment and international trade.

Dr Patricia Jones (University of Oxford) Her research focuses mainly on economic development in Sub-Saharan Africa.

Prof Ferdinand Rauch (University of Oxford) His research interests are in applied international economics and economic geography.

Prof David Vines (University of Oxford) His core subject area is macroeconomic theory and policy.

Professor, Contemporary India Princeton University

Princeton University seeks qualified candidates for a tenured professorship in any discipline, including the arts, the humanities, the social sciences, engineering and the natural sciences. Candidates are required to have regional expertise on India, knowledge of relevant foreign languages, and experience managing a center or program. In addition to contributing to their respective disciplinary department and to the wider research community of the Princeton Institute for International and Regional Studies (PIIRS), they are expected to broaden Princeton’s international networks and strengthen regional course offerings at the University. Field of specialization is open.

Applicants should apply online at Senior scholars should submit a brief letter of interest along with a curriculum vita and a list of references, but no publications, letters of recommendation or writing samples at this time. For fullest consideration, please apply by October 2, 2017.

Essential Qualifications:
Excellence in a recognized field or discipline. Regional expertise on India.

Further questions about this position may be directed to Susan Bindig at .

Princeton University does not discriminate on the basis of age, race, color, sex, sexual orientation, gender identity, religion, national or ethnic origin, disability, or veteran status in any phase of its employment process

Lecturer (Assistant Professor) in Agricultural and Environmental Economics, Lancaster University

The Department of Economics invites applications for a Lecturer (Assistant Professor) in Agricultural and Environmental Economics, with a focus on sustainable development. This position is especially research focused during the first five years, with little teaching during the first two years. The Department of Economics is an independent part of the Lancaster University Management School (LUMS), which is the most research-intensive business school in the UK (REF 2014). With over 40 members of faculty from more than 15 countries, the Department has doubled in size over the last 10 years. It provides an international, collegial and dynamic research environment with a commitment to world-class academic excellence.

You should have a Ph.D. in economics, with research interests in agricultural, development or environmental economics. An interest in economic development and food security, related to environmental change is particularly desirable. A quantitative background together with some experience in dealing with satellite-based and/or geo-referenced data would be an asset. You are expected to publish research outputs in high-quality economic journals and in scientific journals of general interest. In addition, you are expected to consider appropriate outreach vehicles to ensure that their scientific contribution also has real-world “impact” and to build bridges across disciplinary boundaries within the University.

Applicants should submit their application online by November 20, 2017. Job packets must contain a cover letter, CV, at least one research paper, and a summary of teaching evaluations (if available). Three letters of reference should be emailed to Caren Wareing A recruitment committee will be attending and conducting first-round interviews at the AEA meetings in Philadelphia in January 2018.

Please direct informal enquiries to Dr Jean-Francois Maystadt (), Chair of the Recruiting Committee.

We welcome applications from people in all diversity groups.

Salary:   £34,520 to £47,722
Closing Date:   Monday 20 November 2017
Interview Date:   Monday 15 January 2018
Reference:  A2088

Further information

Tenure Track Faculty-Economics, Villanova University

The Department of Economics at the Villanova School of Business seeks to fill a tenure track position in Economics beginning Fall 2018 at the rank of Assistant Professor, with the rank of Associate Professor considered for candidates with outstanding qualifications and experience. We will consider candidates in the areas of Behavioral Economics and Environmental Economics. We are especially interested in hiring an individual with strong applied econometrics expertise.

Villanova is a Catholic university sponsored by the Augustinian order. Diversity and inclusion have been and will continue to be an integral component of Villanova University’s mission. The University is an Equal Opportunity/Affirmative Action employer and seeks candidates who understand, respect and can contribute to the University’s mission and values.

Duties and Responsibilities

The Villanova School of Business is committed to both scholarly research and teaching excellence. In addition to maintaining an active research agenda leading to high quality publications, the appointment involves teaching at the undergraduate and graduate levels with a teaching load of two courses per semester.

Minimum Qualifications

Candidates are expected to have completed their Ph.D. degree before the appointment starts. Candidates must demonstrate a strong commitment to high quality research and possess excellent teaching skills.

Preferred Qualifications

Evidence of strong research potential and teaching excellence are highly valued.

Physical Requirements and/or Unusual Work Hours

Special Message to Applicants

Applicants must apply online at by December 1, 2017.
All initial applications are to include:
Application letter
Curriculum vitae
Statement of teaching philosophy
Statement of research interests
Copies of recent research papers
3 letters of reference
For finalists, an official graduate transcript will be required. To mail hard copy of transcripts, please send to Search Committee, Department of Economics, Villanova University, 800 Lancaster Avenue, Bartley Hall, Villanova, PA 19085.
Review of applications begins upon receipt and continues until the position is filled.

To apply, visit:

Villanova is a Catholic university sponsored by the Augustinian order. Diversity and inclusion have been and will continue to be an integral component of Villanova University’s mission. The University is an Equal Opportunity/Affirmative Action employer and seeks candidates who understand, respect and can contribute to the University’s mission and values. Villanova University is committed to providing leadership in the attainment of equal employment for all individuals. It is the policy and practice of Villanova University to recruit and select applicants on the basis of their qualifications and abilities. This effort is in compliance with all federal and state laws, including Title VI and VII of the Civil Rights Act of 1964, Title IX of the Educational Amendments of 1972, Section 504 of the Rehabilitation Act of 1975, Executive Order 11246, and the Americans with Disabilities Act. 

Academic position in European Economic Policy, Catholic University of Louvain, Belgium

Vacancy Reference : 15702 / ESPO 088 / 2018 (to be quoted in any correspondence)

The Université catholique de Louvain and the Univeristy Saint-Louis Bruxelles invite applications for a tenure track or tenured full time position in European economic policy (75% UCL and 25% USL-B)


The successful candidate will be responsible for teaching on the joint European studies programmes offered by the Université catholique de Louvain (UCL) and Saint-Louis University, Brussels, and at UCL’s Louvain School of Management. Classes will cover the economic foundations of European integration, economic and monetary union, as well as the involvement of the European Union in international trade and EU trade policy.


The successful candidate will conduct research on the economic policies of the European Union, such as economic and monetary integration, international trade and trade policy, the internal market and competition policy, geographical inequalities and regional policies, the common agricultural policy, migratory flows or environmental issues. An aptitude for and interest in trans-disciplinary collaborations would be appreciated, especially when this is backed up by evidence of work already done with colleagues from other disciplines.

Practical informations

Starting date : 1st of September, 2018

Further information :
Professor Denis Duez, President of the Institute of European Studies USL-B,
Professor Sébastien Van Bellegem, dean ESPO –
Professor Michel Liegeois, research director ISPOLE –

Localization : Humanities Sector
Faculty of Economic, Social and Political Sciences and Communication (ESPO) (
Institut de sciences politiques Louvain-Europe (ISPOLE) (
Institut d’études européennes (IEE) (

General conditions

Tasks : the applicant will
– be responsible for teaching courses at all study levels (i.e. undergraduate and postgraduate), as well as in programmes of continuing education;
– supervise the final diploma research (i.e. theses) of undergraduate and graduate students, as well as Ph.D. theses;
– be involved in (and/or supervise, promote) research programmes;
– contribute to the international visibility of the University through teaching and research excellence;
– be available to ensure, in the long term, different service activities and responsibilities within the University and its entities;
– contribute to activities of the University with a societal impact in the fields of the economy, socio-cultural changes or cooperation with developing countries.
Qualifications : the applicant must have

– a Ph.D. and show a significant research activity in Economics;
– significant scientific record with international publications;
– either studied abroad for an extensive period or have had substantial experience outside the UCL;
– experience in and the aptitude for teaching at university level;
– capacity to work within a team of teachers and to integrate research findings into teaching;
– creativity and must be open to teaching innovation and interdisciplinarity;
– capacities required to undertake high-level academic research: capacity to raise research fundings, to supervise projects, to animate and lead a research team;
– good knowledge of both spoken and written French and English. If this is not the case, the applicant accept to learn French and/or English in order to be able to teach in French and English within 2 years. Fluency in other languages is an asset.

URL for Further Information

Lecturer/Senior Lecturer/Reader in Economics, Dept of Economics, University of Essex

The Department of Economics at the University of Essex is seeking to make multiple appointments at Lecturer, Senior Lecturer and Reader levels. Lecturers are equivalent to tenure track Assistant Professors positions and Senior Lecturers/Readers are equivalent to tenured Associate Professors. Applications are invited from all fields.

The Department is ranked 5th among all UK Economics departments for research excellence (REF 2014). The University of Essex is also ranked in the top category for teaching excellence (TEF 2017). The Department of Economics provides a vibrant research environment and has a strong collegial culture. It is a growing department, currently comprising 48 full-time academics, with distinctive clusters in microeconomics, macroeconomics, applied economics and econometrics. The University of Essex is located 60 miles northeast of London.  For more information about the department and its programs see

The offer is competitive, and includes a generous relocation allowance, as well as the possibility of paid research leave and research funds. In addition the University currently operates a Market Supplement policy.

The Role and Duties

The post-holder will be expected to conduct research in any area of applied or theoretical Economics, submitting research grant applications and any other activities which promote the profile of the Department; undertake teaching of theoretical or applied Economics modules at the undergraduate and postgraduate levels, providing pastoral support and supervision to students in their research projects; and contribute to the effective administration of the Department.

Applicants at the Senior Lecturer/Reader level will also be required to supervise PhD students; generate research grant income; provide research support and leadership to junior colleagues in the group; publish high-quality research in top-ranked peer-reviewed journals; and take on senior administrative and management roles within the Department.

Qualifications and Skills

Applicants at the Lecturer level should have obtained a PhD in Economics or be near completion.

You will need to provide evidence of a sophisticated research agenda in Economics and demonstrable potential of excellence in research; and demonstrate a potential of excellence in teaching at undergraduate and/or postgraduate level and knowledge of teaching either theoretical or applied Economics. You will be expected to demonstrate evidence of a clear publication plan for submission to future Research Excellence Framework (REF) programmes. Producing and publishing high-quality research; contributing to the supervision of PhD students; attracting research funding; and a willingness to be directly involved in the administration and management of the Department and its expansion plans in relation to Economics are all essential for the post.

Applicants at the Senior Lecturer/Reader level should have already obtained a PhD in Economics. In addition to the expectations at the Lecturer level, you will have a strong record of high-quality research publications, including papers in top-ranked international journals; and proven experience of academic (teaching and learning) leadership. Management and leadership skills combined with the ability to motivate and co-ordinate other staff and the demonstrable ability to mentor junior colleagues are both essential at this level.

At the University of Essex internationalism is central to who we are and what we do. We are committed to being a cosmopolitan, internationally-oriented university that is welcoming to staff and students from all countries and a university where you can find the world in one place.

Please visit our website ( for a full job description, person specification and more information relating to this post. We recommend you read this information carefully before making an application. Applications should be made on-line, but if you would like advice or help in making an application, or need information in a different format, please telephone the Resourcing Team (01206 874588/873521).

Closing date: 14 January 2018

Interviews are planned for:  30 January 2018, 1 February 2018, 13 February 2018 and 14 February 2018

Salary: £39,993 – £47,722 per annum (Lecturer), £50,618 – £56,951 per annum (Senior Lecturer/Reader)

Faculty/PhD Candidate, The Kiel Institute for the World Economy, Germany

The Kiel Institute for the World Economy (IfW) is searching for a junior researcher specializing in environmental economics beginning in November 2017.

Ph.D. Student in Environmental and International Economics (EG 13, 75% of FTE)

The research position is part of a wider initiative, the Kiel Centre for Globalization (KCG). The KCG is a 2.2 million initiative by the Christian-Albrechts-University (CAU) Kiel and the Kiel Institute for the World Economy (IfW), funded by the Leibniz Association and the State Government of Schleswig-Holstein. The KCG focuses on evaluating global supply chains as an important aspect of globalization. It consists of four research teams that will analyze the relocation of production activities around the globe applying insights from the fields of Economics, Ethics and Management Science. It is envisaged that KCG senior and junior researchers located at the CAU Kiel and the IfW will interact with each other intensively.

For further information on the KCG, see (in English) and (in German).

The successful candidate will work in KCG project #2 led by Aoife Hanley (IfW) and Katrin Rehdanz (CAU and IfW), aiming at investigating the relationship between global value chains and green innovation as well as the effect of globalization on firms’ energy use and emissions. The position will be allotted to the IfW research area “Global Division of Labor” headed by the speaker of the KCG, Holger Görg.

The successful candidate is expected to pursue a PhD. in Kiel’s Quantitative Economics program (see The position has a three year term and the salary is according to the German public sector pay scale at grade TV-L13 (75% of FTE).

The Kiel Institute for the World Economy (IfW) is an international center for research in Global Economic Affairs, Economic Policy Consulting, Economic Education and one of the leading and one of Germany’s most reputed think-tanks and economic research institutes.

Kiel city is located on the Baltic Sea within easy distance of Hamburg and Berlin, and with strong historic ties to Denmark. Kiel is Germany’s sailing capital and acts as an important shipping gateway to Scandinavia. The city and its surrounds boast a high quality of life and moderate living costs.


Candidates should hold or be close to completing a Master’s degree in economics or a closely related subject. They are expected to possess excellent academic records and be familiar with theoretical modelling or/and relevant empirical methods. Experiencing in working with large data sets would be a plus. Candidates are expected to be fluent in German and English.


Applications must contain the following items:

  1. A cover letter (maximum two pages) describing the candidates’ academic background, research interests and motivation for applying.
  2. A detailed curriculum vitae, including the names, addresses, telephone numbers and emails of three reference persons.
  3. At least two reference letters.
  4. Degree certificates, grade transcripts, and, if available, GRE or GMAT scores.

Candidates need to submit their application documents with their family names as the file names online by 03.11.2017 (ID-Nr. „Globalization-03“) ( The submission of an application photo is expressly waived.

IfW is an equal opportunity employer. Women with equivalent qualifications, competence and expertise will be given preference. We therefore strongly encourage women with appropriate qualifications to apply for the positions.

The IfW works individually with its staff to establish flexible working time schemes that allow staff members to maintain a good work-family balance (

IfW is committed to employing persons with recognized disabilities and will therefore give such individuals preference over persons without disabilities if they are equally qualified.

For information, please contact Prof. Dr. Katrin Rehdanz ( ) or Prof. Aoife Hanley, PhD ( ).

Tenured/Tenure-Track Faculty Positions in Economics, NYU Shaghai

NYU Shanghai is currently inviting applications for several positions at the ranks of assistant, associate, or full professor in Economics. We are especially but not exclusively interested in candidates whose research topics fall in the areas of econometrics, microeconomics, decision making and behavior, public health, or political economy, and in candidates whose research settings include China, or Asia more broadly. Our search is, however, open in terms of research topics and settings, and we will consider highly qualified candidates in all fields of economics. Successful candidates will demonstrate the capacity both for significant research and for high-quality instruction in the classroom.

The terms of employment in NYU Shanghai are comparable to those in U.S. institutions in terms of compensation and research start-up funds, and include housing subsidies and educational subsidies for children. NYU Shanghai faculty members may also spend time at NYU New York and other sites in NYU’s global network, in order to engage in teaching or research. The position features a standard teaching load of three courses per year.

We are open to immediate applications, and we will continue to review applications until the positions are filled, for appointments to begin in the Fall 2018 semester.  The deadline for junior applications is November 26th, 2017.  All applicants should submit a curriculum vitae, separate statements of research and teaching interests (no more than three pages each), and electronic copies of up to three recent relevant publications or working papers.  Junior applicants should also submit the names and email addresses of at least three referees, who will be contacted to upload their reference letters. In the case of mid-career and senior applicants, reference letters will be requested at a later stage as needed. Please visit our website at for instructions and other information on how to apply.

To apply follow this link

If you have any questions, please e-mail

About NYU Shanghai:
NYU Shanghai is the newest degree-granting campus within New York University’s global network.  It is the first higher-education joint venture in China authorized to grant degrees that are accredited in the U.S. as well as in China. All teaching is conducted in English. A research university with liberal arts and science at its core, NYU Shanghai resides in one of the world’s great cities with a vibrant intellectual community.
NYU Shanghai recruits scholars of the highest caliber who are committed to NYU’s global vision of innovative research and transformative teaching, and who embody the global society in which we live.

NYU’s global network includes degree-granting campuses in New York, Shanghai, and Abu Dhabi, complemented by eleven additional academic centers across five continents. Faculty and students circulate within the network in pursuit of common educational interests and cross-cultural, interdisciplinary endeavors, both local and global.

NYU Shanghai is an equal opportunity employer committed to equity, diversity, and social inclusion. We strongly encourage applications from individuals who are under-represented in the profession, across color, creed, race, ethnic and national origin, physical ability, and gender and sexual identity. NYU Shanghai affirms the value of differing perspectives on the world as we strive to build the strongest possible university with the widest reach.

EOE/AA/Minorities/Females/Vet/Disabled/Sexual Orientation/Gender Identity Employer