Regional Integration and Lobbying for Tariffs Against Non Members ∗ Olivier Cadot † Jaime de Melo ‡ Marcelo Olarreaga § Third Revision February 1998 Abstract We study the impact of regional trading arrangements (rias) on tariff policy towards non-members in a three-good, three-country political-economy model. Comparing free-trade areas (ftas) with and without rules of origin and customs unions (cus) with varying degrees of economic and political integration, we show how increasingly deep integration can lead to rising protection against non-member imports. Other differences between ftas and cus, like the extent of free-riding in a cu and any component of a cu’s tariff designed to improve the members’ terms of trade, are not explicitly accounted for. Nevertheless, the results suggest that ftas are likely to welfare-dominate cus. JEL classification numbers: F11, F13, F15 Keywords: fta, cu, political economy. ∗ We thank Avinash Dixit, Martin Richardson, T.N. Srinivasan and two anonymous referees for helpful suggestions on an earlier draft. We also thank participants at seminars at Humboldt, Laval, Lisbon, and Geneva Universities and at the 1996 aea meetings for comments. This paper is produced as part of a cepr research programme on Market Integration, Regionalism and the Global Economy, supported by a grant from the Ford Foundation (no. 920-1265); Cadot also gratefully acknowledges financial assistance from Insead. † Insead, bd de Constance, 77305 Fontainebleau, France. ‡ University of Geneva, 102 bd Carl Vogt, 1211 Geneva 4, Switzerland, and cepr. § World Trade Organization, Economic Research, 1211 Geneva, Switzerland, and cepr.