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The WTO Promotes Trade, Strongly But Unevenly

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  • Subramanian, Arvind
  • Wei, Shang-Jin

Abstract

This paper furnishes robust evidence that the WTO has had a powerful and positive impact on trade, amounting to about 120% of additional world trade (or US$8 trillion in 2003 alone). The impact has, however, been uneven. This, in many ways, is consistent with theoretical models of the GATT/WTO. The theory suggests that the impact of a country’s membership in the GATT/WTO depends on what the country does with its membership, with whom it negotiates, and which products the negotiation covers. Using a properly specified gravity model, we find evidence consistent with these predictions. First, industrial countries that participated more actively than developing countries in reciprocal trade negotiations witnessed a large increase in trade. Second, bilateral trade was greater when both partners undertook liberalization than when only one partner did. Third, sectors that did not witness liberalization did not see an increase in trade.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5122.

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Date of creation: Jul 2005
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Handle: RePEc:cpr:ceprdp:5122

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Keywords: GATT; special and differential treatment;

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References

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  1. Reuven Glick & Andrew K. Rose, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," NBER Working Papers 8396, National Bureau of Economic Research, Inc.
  2. Kyle Bagwell & Robert W. Staiger, 2002. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO," Discussion Papers 0102-37, Columbia University, Department of Economics.
  3. Subramanian, Arvind & Wei, Shang-Jin, 2005. "The WTO Promotes Trade, Strongly But Unevenly," CEPR Discussion Papers 5122, C.E.P.R. Discussion Papers.
  4. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
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  14. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc.
  15. Andrew Rose, 2005. "Does the WTO Make Trade More Stable?," Open Economies Review, Springer, vol. 16(1), pages 7-22, January.
  16. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341.
  17. Arvind Panagariya & Dani Rodrik, 1991. "Political-Economy Arguments for a Uniform Tariff," NBER Working Papers 3661, National Bureau of Economic Research, Inc.
  18. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
  19. Bagwell, Kyle & Staiger, Robert W., 2005. "Erratum to "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO" [J. Int. Econ. 63 (1) (2004) 1-29]," Journal of International Economics, Elsevier, vol. 67(2), pages 267-267, December.
  20. Wolf, Martin, 1987. "Differential and More Favorable Treatment of Developing Countries and the International Trading System," World Bank Economic Review, World Bank Group, vol. 1(4), pages 647-68, September.
  21. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
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