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Discussion Paper 2009-04
JEL Classi fication: F13

Abstract

This paper examines the e ect of cross-border lobbying on domestic lobbying and on external tari s in both Customs Union (CU) and Free Trade Area (FTA). We do so by developing a two-stage game which endogenizes the tari formation function in a political economic model of the directly unproductive rent-seeking activities type. We nd that cross-border lobbying unambiguously increases both domestic lobbying and the equilibrium common external tari s in a CU. The same result also holds for FTA provided tari s for the member governments are strategic complements. We also develop a speci c oligopolistic model of FTA and show that tari s are indeed strategic complements in such a model.

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