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Possible Unintended Effects of Restrictions on Foreign Lobbying in a Customs Union

We consider the interactions between domestic lobbying and cross-border lobbying in a Customs Union (CU) in determining the Common External Tariff (CET). There are two types of cross-border lobbying: (i) lobbying from member-nation firms to the governments of other CU countries, and (ii) lobbying by firms from outside to the CU nation governments. Within this context, we analyze the effect of regulations on foreign lobbying on the equilibrium lobbying levels, and on the CET. If lobbying levels are strategic complements, tightening of restrictions on lobbying from outside the CU unambiguously reduces all types of lobbying. If non-CU firms are relatively large, the CET will rise in response to tighter regulations.

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