What do trade negotiators negotiate about? There are two distinct theoretical approaches in the economics literature that offer an answer to this question: the terms-of-trade theory and the commitment theory. The terms-of-trade theory holds that trade agreements are useful to governments as a means of helping them escape from a terms-of-trade-driven Prisoners' Dilemma. The commitment theory holds that trade agreements are useful to governments as a means of helping them make commitments to the private sector. These theories are not mutually exclusive, but there is little direct evidence on the empirical relevance of either. We attempt to investigate empirically the purpose served by market access commitments negotiated in the World Trade Organization. We find broad support for the terms-of-trade theory in the data. We claim more tentatively to find support in the data for the commitment theory as well.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12727.
Length: Date of creation: Dec 2006 Date of revision: Handle: RePEc:nbr:nberwo:12727
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Find related papers by JEL classification: F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General F1 - International Economics - - Trade F11 - International Economics - - Trade - - - Neoclassical Models of Trade F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F15 - International Economics - - Trade - - - Economic Integration F5 - International Economics - - International Relations and International Political Economy F51 - International Economics - - International Relations and International Political Economy - - - International Conflicts; Negotiations; Sanctions F53 - International Economics - - International Relations and International Political Economy - - - International Agreements and Observance; International Organizations F59 - International Economics - - International Relations and International Political Economy - - - Other
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