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The WTO Promotes Trade, Strongly But Unevenly

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  • Shang-Jin Wei
  • Arvind Subramanian

Abstract

This paper furnishes robust evidence that the GATT/WTO has had a powerful and positive impact on trade. The impact has, however, been uneven. GATT/WTO membership for industrial countries has been associated with a large increase in imports estimated at about 40 percent of world trade. The same has not been true for developing country members, although those that joined after the Uruguay Round have benefited from increased imports. Similarly, there have been asymmetric effects among sectors, with WTO membership associated with substantially greater imports in sectors where barriers are low. These results are consistent with the history and design of the institution, which presided over significant trade liberalization by the industrial countries except in sectors such as food and clothing; largely exempted developing countries from the obligations to liberalize under the principle of special and differential treatment; but attempted to redress the latter by imposing greater obligations on developing country members that joined after the Uruguay Round.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/185.

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Length: 41
Date of creation: 01 Sep 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/185

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Keywords: GATT; World Trade Organization; Economic models; industrial country; industrial countries; free trade area; free trade; trade liberalization; world trade; trade barriers; trade area; trading system; quantitative restrictions; tariff rates; nontariff barriers; tariff barriers; tariff reductions; tariff lines; bilateral imports; world economy; non-wto members; tariff liberalization; bilateral trade; aggregate trade; international trade; trade restrictions; patterns of trade; free trade areas; partner country; importing country; balance of payments; global trade; market access; liberalization efforts; world trading system; tariff reduction; export subsidies; unilateral liberalization; foreign trade; tariff cuts; trade values; non-tariff barriers; average tariffs; trade policies; import barriers; zero tariff; trade areas; trade negotiations; tariff schedules; import liberalization; common market; export taxes; free trade agreements; trade volumes; trade pattern; trade volume; pattern of trade; member country; tariff concessions; trading opportunities; multilateral rounds; trade regimes; most-favored-nation; trading blocs; tariff rate; economic integration; mfn tariffs; trading patterns; high tariff barriers; trade rounds; import value; regional trade; measure of trade; trade regime; trade impact; trade blocs; preferential access; rules of origin; trade terms; preferential market access; market structure; import side; increasing trade; reducing tariffs; weighted tariff; trade liberalizing; international trading; zero tariffs; global imports; voluntary export restraints; trading partners; volume of trade; trade effect; trade agreements; liberal trade; global integration; liberal trade policy; competition policy; duty-free access; aggregate imports; merchandise trade; value of imports;

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References

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  1. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  2. Andrew K. Rose, 2004. "Does the WTO Make Trade More Stable?," NBER Working Papers 10207, National Bureau of Economic Research, Inc.
  3. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  4. repec:rus:hseeco:123147 is not listed on IDEAS
  5. Bagwell, Kyle & Staiger, Robert W., 2004. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO," Journal of International Economics, Elsevier, vol. 63(1), pages 1-29, May.
  6. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
  7. Andrew K. Rose, 2002. "Do We Really Know that the WTO Increases Trade?," NBER Working Papers 9273, National Bureau of Economic Research, Inc.
  8. Mattoo, Aaditya & Roy, Devesh & Subramanian, Arvind, 2002. "The Africa Growth and Opportunity Act and its rules of origin : generosity undermined?," Policy Research Working Paper Series 2908, The World Bank.
  9. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
  10. Rose, Andrew K, 2002. "Do WTO Members have More Liberal Trade Policy?," CEPR Discussion Papers 3659, C.E.P.R. Discussion Papers.
  11. 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, December.
  12. Subramanian, Arvind & Wei, Shang-Jin, 2005. "The WTO Promotes Trade, Strongly But Unevenly," CEPR Discussion Papers 5122, C.E.P.R. Discussion Papers.
  13. 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.
  14. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  15. 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.
  16. 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.
  17. Arvind Panagariya & Dani Rodrik, 1991. "Political-Economy Arguments for a Uniform Tariff," NBER Working Papers 3661, National Bureau of Economic Research, Inc.
  18. 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.
  19. repec:rus:hseeco:123558 is not listed on IDEAS
  20. Aaditya Mattoo & Arvind Subramanian, 2004. "The WTO and the Poorest Countries," IMF Working Papers 04/81, International Monetary Fund.
  21. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 433-462, October.
  22. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
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