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Abstract.Customs unions constitute agreements to engage in free intra-union trade and to levy common external tariffs on trade with non-members. Existing theoretical models do not agree on how the common external tariffs are chosen; different, somewhat ad hoc choice rules have been employed. In this paper, a model of customs union formation is developed in which the Pareto principle and the assumption of unanimity are used to construct a mechanism for the choice of common external tariffs. The model is structured as a three-stage game in which union members select common external tariffs that yield utility outcomes that are Pareto optimal and dominate the stand-alone alternative. Numerical examples are use to demonstrate the wide range in the nature of these outcomes. Our results are discussed in relation to the delegation principle developed by Gatsios and Karp and to modeling approaches reported in the customs unions literature. The paper emphasizes the importance of modeling the formation of the customs union agreement.Acknowledgement. We thank, without implicating, Ken Binmore, Arja Turunen-Red and Ian Wooton for valuable comments on earlier drafts of this paper. Woodland wishes to acknowledge the Þnancial support of an Australian Research Council research grant. Melatos gratefully acknowledges the Ronald Henderson Research Foundation for Þnancial support.

This paper provides an in-depth examination of the trade effects of three regional trade agreements (RTAs) -the ASEAN Free Trade Agreement (AFTA), the Common Market for Eastern and Southern Africa (COMESA) and the Southern Cone Common Market (MERCOSUR) --in the agricultural sector.Results from a gravity model suggest that the creation of AFTA, COMESA and MERCOSUR have increased trade in agricultural products between their member countries. There is no robust indication of trade diversion with respect to imports from outside the region. The agreements are therefore net trade creating. There is no robust indication however that there has been strong trade creation with non-members in the case of any of the RTAs under study. In some cases, lack of transport and communications infrastructure, in addition to supply constraints, lessens the effect of the RTA on trade flows. Trade costs such as transport and logistics seem to remain important factors in determining agricultural trade flows. In some RTAs, countries have a comparative advantage in exporting many of the same agricultural products, thereby decreasing the impact of the preferential market access. A number of implications for South-South RTAs can be drawn from examining these very different agreements.

We analyse the trade and welfare impact of quarantine measures imposed by Australia on imports of pigmeat. In particular, we account for changes to Australia’s pigmeat quarantine policy over time including those changes related to the recent resolution of a WTO dispute between Australia and the European Union. Using a random utility model, and applying it to corner solutions in import decisions, tariff equivalents (by major trading partner) are estimated for the different pigmeat quarantine regimes implemented by Australia during the period 1988–2009. The welfare impact on consumers, producers and foreign exporters is computed using a partial equilibrium model calibrated on the econometric estimates. The quarantine regimes had a strong effect on trade and welfare with a tariff equivalent above 113 per cent of average real‐world prices over the period analysed.

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