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SIM, Seung-Gyu
Department Aoyama Gakuin University Department of International Economics, School of International Politics, Economics and Communication Position Professor |
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| Language | English |
| Publication Date | 2016/06 |
| Type | Academic Journal |
| Peer Review | Peer reviewed |
| Title | The Most Favored Nation Principle: Passive Constraint on Active Commitment |
| Contribution Type | Collaboration |
| Journal | Korean Economic Review |
| Journal Type | Another Country |
| Publisher | Korean Economic Association |
| Volume, Issue, Page | 32(1),pp.77-99 |
| Author and coauthor | Jeongmeen Suh, Sihoon Nahm, and Seung-Gyu Sim |
| Details | This study examines how the welfare implication of the “most-favored-nation” (MFN) principle changed when the trade agreement mode shifted from a “one-shot-multilateral-trade-agreement” to “sequential-bilateral-trade-agreements.” It emphasizes that the MFN principle works as “passive constraints” in the former but “active commitments” in the
latter. Under the sequential-bilateral-trade-agreements, (i) an importing country strategically takes a cost-efficient country as its first (second) trading partner when the MFN principle is (not) embedded, and (ii) embedding the MFN clause improves the trade surplus of the importing country and the world economy. This principle reverses the welfare implication in the existing literature. Finally, the importing country prefers the sequential agreements with the MFN clause to other cases in which it can choose simultaneous or sequential agreements with/without the MFN clause. |