Working Paper no. 47

Is Article XXIV Bad?

Ben Zissimos and David Vines (January 2000)

The current polarisation in the world trade system towards regional block formation could threaten further multilateral trade liberalisation. This paper identifies the incentive structure created by Article XXIV itself, the set of WTO rules governing trade block formation, as an impediment to the multilateral liberalisation process. Even if external tariffs are not allowed to rise, as stipulated by Article XXIV, there is a terms of trade externality to trade block formation and expansion. This benefits members (even relative to free trade) but the rest of the world suffers. “Open Regionalism” is shown not to provide a viable solution. Ben Zissimmos: Centre for the Study of Globalisation and Regionalisation, University of Warwick, and Institute of Economics and Statistics, University of Oxford. Address: IES, Manor Road, Oxford OX1 3UL; tel +(44) 1865 271086; fax (44) 1865 27109; benjamin.zissimos@economics.ox.ac.uk.David Vines: details as given for previous working paper.