The Content Requirement and the Importation of Intermediate Products in a Customs Union

Abstract

This paper studies the setting of trade policy in a custom union. The tools of this policy include tariff and content requirements. Under this framework, the job market is introduced and the employment has a share in the Welfare function. The conditions under which the content requirement is better than tariff as a trade policy tool are founded. Moreover, the paper analyzes the position that each country takes in the setting of the trade policy.