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Should Credit be Given for Autonomous Liberalization in Multilateral Trade Negotiations?

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  • Mattoo, Aaditya
  • Olarreaga, Marcelo

Abstract

As each new round of multilateral trade negotiations approaches, there is a demand for a negotiating rule that would give credit for autonomous liberalization. This Paper shows that the desirability and feasibility of such a rule depends on when it is instituted. A credit rule established at the beginning of a round of negotiations has primarily a distributional effect, favouring those who have already undertaken liberalization. The implementation of such a rule relies on the generosity of those who have not liberalized. We propose instead the establishment of a credit rule at the end of a round of negotiations, which creates an ex ante assurance that any unilateral liberalization will receive credit in the next round. Such a rule would help induce and/or enhance liberalization between negotiating rounds by reducing the gains from retaining protection as negotiating currency. Moreover, it leads to lower intertemporal average protection in all countries under plausible conditions. Most importantly, such an ex ante rule does not rely on altruism to be generally acceptable.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2821.

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Date of creation: Apr 2001
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Handle: RePEc:cpr:ceprdp:2821

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Keywords: Credit; Unilateral Liberalization; WTO;

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References

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  1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
  2. Grossman, Gene M. & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Scholarly Articles 3450062, Harvard University Department of Economics.
  3. Won Chang & L. Alan Winters, 2002. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," American Economic Review, American Economic Association, vol. 92(4), pages 889-904, September.
  4. repec:dgr:uvatin:2098059 is not listed on IDEAS
  5. Ingco, Merlinda D., 1995. "Agricultural trade liberalization in the Uruguay Round : one step forward, one step back?," Policy Research Working Paper Series 1500, The World Bank.
  6. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, vol. 47(2), pages 345-370, April.
  7. Olarreaga, Marcelo & Soloaga, Isidro & Winters, Alan, 1999. "What's behind MERCOSUR's common external tariff?," Policy Research Working Paper Series 2231, The World Bank.
  8. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  9. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
  10. Winters, L. Alan & Chang, Won, 2000. "Regional integration and import prices: an empirical investigation," Journal of International Economics, Elsevier, vol. 51(2), pages 363-377, August.
  11. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
  12. repec:dgr:uvatin:1998059 is not listed on IDEAS
  13. Joseph F. Francois & Will Martin, 1998. "Commercial Policy Uncertainty, the Expected Cost of Protection, and Market Access," Tinbergen Institute Discussion Papers 98-059/2, Tinbergen Institute.
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Cited by:
  1. Hoekman, Bernard, 2002. "Developing Countries and the Political Economy of the Trading System," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Mattoo, Aaditya & Olarreaga, Marcelo, 2000. "Reciprocity across modes of supply in the World Trade Organization : a negotiating formula," Policy Research Working Paper Series 2373, The World Bank.
  3. Mattoo, Aaditya, 2001. "Shaping future GATS rules for trade in services," Policy Research Working Paper Series 2596, The World Bank.
  4. Mattoo, Aaditya & Olarreaga, Marcelo, 2000. "Reciprocity Across Modes of Supply in the WTO: A Negotiating Formula," CEPR Discussion Papers 2481, C.E.P.R. Discussion Papers.
  5. Kyle Bagwell & Robert W. Staiger, 2011. "Can the Doha Round be a Development Round? Setting a Place at the Table," NBER Working Papers 17650, National Bureau of Economic Research, Inc.

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