TRADE LIBERALIZATION WITH IMPERFECT COMPETITION IN GOODS AND LABOR-MARKETS

The effects of removing tariffs and trade barriers on the behaviour of utilitarian monopoly trade unions are considered. A model of intra-in dustry trade in differentiated commodities under monopolistic competit ion and increasing returns to scale is used. National and internationa l trade unions are distinguished. Removal of trade barriers reduces mo nopoly power in labour markets. This forces wages down and increases e mployment and the number of firms in the differentiated goods industry . The removal of trade barriers appears to increase strongly the incen tive for national unions to cooperate internationally. Such cooperatio n would undermine the benefits of trade liberalization for non-members of the unions.