Accession Number:

AD0607192

Title:

A NEW LOOK AT CUSTOMS UNION THEORY,

Descriptive Note:

Corporate Author:

RAND CORP SANTA MONICA CALIF

Personal Author(s):

• Cooper,C. A.
• Massell,B. F.

Report Date:

1964-10-01

Pagination or Media Count:

9.0

Abstract:

This paper discusses the following 1 In the world envisaged by present customs union theory, trade diversion cannot raise welfare. Lipseys 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

Subject Categories:

Distribution Statement:

APPROVED FOR PUBLIC RELEASE