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Backward stealing and forward manipulation in the WTO

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  • Bagwell,K.
  • Staiger,R.W.

    (University of Wisconsin-Madison, Social Systems Research Institute)

Abstract

Motivated by the structure of WTO negotiations, we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most-favored-nation (MFN) principle. We identify backward-stealing and forward-manipulation problems that arise when governments bargain under the MFN principle in a sequential fashion. We show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed. We identify the WTO nullification-or-impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems. In this way, we suggest that WTO rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9.

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Date of creation: 2004
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Handle: RePEc:att:wimass:20049

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Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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Citations

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Cited by:
  1. Elsayyad, May & Konrad, Kai A., 2012. "Fighting Multiple Tax Havens," Munich Reprints in Economics 13964, University of Munich, Department of Economics.
  2. James Lake & Halis M. Yildiz, 2014. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Departmental Working Papers 1403, Southern Methodist University, Department of Economics.
  3. Rodney Ludema (Georgetown University) and Anna Maria Mayda (Georgetown University and CEPR), 2005. "Do Countries Free Ride on MFN?," Working Papers gueconwpa~05-05-13, Georgetown University, Department of Economics.
  4. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, vol. 73(1), pages 1-30, September.
  5. Chad Bown & Meredith Crowley, 2004. "China's export growth and U.S. trade policy," Working Paper Series WP-04-28, Federal Reserve Bank of Chicago.
  6. Nuno Limao, 2006. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," American Economic Review, American Economic Association, vol. 96(3), pages 896-914, June.

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