Accession Number : AD0607192

Title :   A NEW LOOK AT CUSTOMS UNION THEORY,

Corporate Author : RAND CORP SANTA MONICA CALIF

Personal Author(s) : Cooper,C. A. ; Massell,B. F.

Report Date : OCT 1964

Pagination or Media Count : 9

Abstract : This paper discusses the following: (1) In the world envisaged by present customs union theory, trade diversion cannot raise welfare. Lipsey's contrary conclusion follows from confusing the effects of two separate policy changes. (2) Second-best is irrelevant in analyzing the welfare effects of a customs union. (3) Although trade creation may (in the Vinerian world) result in a rise in welfare, a country can always do even better by an appropriate policy of non-preferential protection. Although Viner would presumably concur, because he regards free trade (a limiting case of nonpreferential protection) as the best of all worlds, our conclusion follows even if one regards protection as sound policy. (4) Once one leaves the Vinerian world, greater opportunities for gain may be provided by a customs union than by nonpreferential protection; but these opportunities cannot be dealt with in the customary framework developed by Viner and subsequent customs theorists.

Descriptors :   (*ECONOMICS, THEORY), COMMERCE, COSTS, INDUSTRIAL PRODUCTION, CONSUMPTION

Distribution Statement : APPROVED FOR PUBLIC RELEASE