Political economy of preferencial trade agreement

Vol. 27 No. 2 (2007)

Apr-Jun / 2007
Published March 17, 2020

How to Cite

Motta, Daniel Augusto. 2007. “Political Economy of Preferencial Trade Agreement : The Case of Bilateral Asymmetric Negotiation”. Brazilian Journal of Political Economy 27 (2):193-208. https://centrodeeconomiapolitica.org/repojs/index.php/journal/article/view/561.

Political economy of preferencial trade agreement

the case of bilateral asymmetric negotiation

Daniel Augusto Motta
Doctor in Economics at IPE-USP and MA in Financial Economics at FGV-EAESP. Professor of Economics at Ibemc-São Paulo and FGV-EAESP
Brazilian Journal of Political Economy, Vol. 27 No. 2 (2007), Apr-Jun / 2007, Pages 193-208


The purpose of this paper is to analyse the political economy of preferential trade agreements based on a sequential non-cooperative Stackelberg political game between a large economy and a small one, in which the political dispute of rival lobby groups defines the unilateral stance of both governments in the first stage and the Stackelberg “coalition-proof” equilibrium defines t the free trade agreement format in the second stage. Finally, a few modifications in the initial game structure are discussed in order to enhance the small economy’s negotiation power. The political economy model is applied to FTAA case.

JEL Classification: F02, F13, F15.

Keywords: FTAA political economy bargaining non-cooperative games