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Multilateral Trade Negotiations, Bilateral Opportunism and the Rules of GATT

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  • Kyle Bagwell
  • Robert W. Staiger

Abstract

Trade negotiations occur through time and between the governments of many countries. An important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party. In the absence of rules that govern the bilateral negotiation, we first show that the potential for opportunistic bilateral agreements is indeed severe. We next identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation. The reciprocal market access' rule ensures that the market access of a non-participating country is unaltered, and we show that this rule eliminates the potential for opportunistic bilateral negotiations. This rule, however, has practical limitations, and so we next consider the negotiation rules that are prominent in GATT practice and discussion. Our main finding is that the two central rules of GATT -- non-discrimination (MFN) and reciprocity -- effectively mimic the reciprocal market access rule, and therefore offer a practical means through which to protect non-participant welfare and thereby eliminate the potential for opportunistic bilateral negotiations.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7071.

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Date of creation: Apr 1999
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:7071

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Cited by:
  1. Bagwell,K. & Staiger,R.W., 2000. "GATT-think," Working papers, Wisconsin Madison - Social Systems 19, Wisconsin Madison - Social Systems.
  2. Wilfred J. Ethier, 2002. "Unilateralism in a Multilateral World," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(479), pages 266-292, April.
  3. Horn, Henrik & Mavroidis, Petros C, 2001. "Economic and Legal Aspects of the Most Favoured Nation Clause," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2859, C.E.P.R. Discussion Papers.
  4. Eric Bond & Stephen Ching & Edwin L. C. Lai, 2000. "Accession Rules and Trade Agreements: The Case of the WTO," Econometric Society World Congress 2000 Contributed Papers 1626, Econometric Society.
  5. Mohammad Amin, 2004. "Time Inconsistency of Trade Policy and Multilateralism," International Trade, EconWPA 0402002, EconWPA.
  6. G. Schwartz, 2000. "Non-Enforceability of Trade Treaties and the Most-Favored Nation Clause: A Game Theoretic Analysis of Investment Distortions," Princeton Economic Theory Papers, Economics Department, Princeton University 00s17, Economics Department, Princeton University.
  7. Kyle Bagwell & Robert W. Staiger, 2009. "Profit Shifting and Trade Agreements in Imperfectly Competitive Markets," NBER Working Papers 14803, National Bureau of Economic Research, Inc.
  8. Kyle Bagwell & Robert W. Staiger, 2004. "Backward stealing and forward manipulation in the WTO," Discussion Papers, Columbia University, Department of Economics 0405-06, Columbia University, Department of Economics.
  9. Cebi, Pinar & Ludema, Rodney, 2002. "The Rise and Fall of the Most-Favored-Nation Clause," Working Papers, United States International Trade Commission, Office of Economics 15853, United States International Trade Commission, Office of Economics.
  10. Chad Bown & Meredith Crowley, 2004. "China's export growth and U.S. trade policy," Working Paper Series, Federal Reserve Bank of Chicago WP-04-28, Federal Reserve Bank of Chicago.
  11. Meredith A. Crowley, 2003. "An introduction to the WTO and GATT," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q IV, pages 42-57.
  12. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, Elsevier, vol. 73(1), pages 1-30, September.
  13. Chad Bown & Meredith Crowley, 2003. "Trade deflection and trade depression," Working Paper Series, Federal Reserve Bank of Chicago WP-03-26, Federal Reserve Bank of Chicago.
  14. Ronald Fischer & Martín Osorio, 2002. "Why Do We Need Antidumping Rules?," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 134, Centro de Economía Aplicada, Universidad de Chile.

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