This paper studies the determination of split of gains among the negotiating parties (member countries and the acceding country) in a WTO accession negotiation using both cooperative bargaining and non-cooperative bargaining models. In particular, we are interested in the effect of the most favored nation (MFN) principle on the split of gains among the countries. The MFN principle says that any tariff reduction offered by the applicant for accession has to be automatically granted to all existing members. This implies that any deal that an applicant, such as China, makes with a member can be further eroded by subsequent negotiations. It seems reasonable, therefore, to expect China would be disadvantaged by the existence of MFN. Surprisingly, we found that the opposition is true: China’s share of surplus is more when MFN is in place. We find that, under symmetry, the Nash cooperative bargaining model and Rubinstein non-cooperative bargaining model yield the same results about the split of the shares of surplus among the countries.
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Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number
162.
Length: 33 pages Date of creation: Mar 2001 Date of revision: Handle: RePEc:eab:tradew:162
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