The authors analyze various forms of trade liberalization in a three-country model with unions. Oligopolistic firms in two countries face unionized workers, while an oligopolistic firm in the third country faces a competitive labor market. The general result is that a country with a union...

On the assumption that firm effort and costs are publicly observable, it is shown that a policy of future tariff removal is time inconsistent. As a result, less cost-reducing effort is undertaken by the firm than would be optimal under credible commitment. The introduction of asymmetric...