Unilateralism in a Multilateral World

This paper addresses the interplay between unilateralism and multilateralism. I first describe their stylized facts, as I see them. I next present a basic, multi-country model with simple endogenous growth and high initial tariff barriers-a caricature of the world of half a century ago. I then posit governments with objective functions consistent with how policy makers claim to behave, and analyze how such a world economy would evolve. Structures remarkably similar to contemporary multilateralism and unilateralism develop endogenously, with subtle relationships between the two. I conclude that a normative analysis of individual instruments of trade policy is suspect if conducted outside the framework of such a system. Another conclusion is that the pace of multilateral liberalization can be accelerated by the presence of a system of discriminatory unilateral intervention.

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