Technology Choice and Trade Policy in International Oligopolistic Market

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This research investigates whether a formation of bilateral FTA between dissimilar countries becomes a building bloc for multilateral free trade. We obtain the following results: (i) a bilateral FTA can be formed unless the market sizes of the negotiating countries are quite different, and (ii) a bilateral FTA can be a building bloc for free trade through the formation of overlapping FTAs only when the initial FTA is formed between relatively large countries. These results imply that multilateral free trade can be realized when FTAs between developed countries are formed firstly and then FTAs between developed and developing countries are formed.