Advanced Search
MyIDEAS: Login to save this paper or follow this series

Size Inequality, Coordination Externalities and International Trade Agreements

Contents:

Author Info

  • Kamal Saggi

    ()
    (Department of Economics, Vanderbilt University)

  • Nuno Limao

    ()
    (Department of Economics, University of Maryland, NBER and CEPR)

Abstract

Developing countries now account for a significant fraction of both world trade and two thirds of the membership of the World Trade Organization (WTO). However, many are still individually small and thus have a limited ability to bilaterally extract and enforce trade concessions from larger developed economies even though as a group they would be able to do so. We show that this coordination externality generates asymmetric outcomes under agreements that rely on bilateral threats of trade retaliation---such as the WTO---but not under agreements extended to include certain financial instruments. In particular, we find that an extended agreement generates improvements in global efficiency and equity if it includes the exchange of bonds prior to trading but not if it relies solely on ex-post fines. Moreover, a combination of bonds and fines generates similar improvements even if small countries are subject to financial constraints that prevent them from posting bonds.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/pubs/VUECON/vu11-w15.pdf
File Function: First version, September 2011
Download Restriction: no

Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 1115.

as in new window
Length:
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:van:wpaper:1115

Contact details of provider:
Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Developing countries; WTO; Trade; Tariffs; Reciprocity; Policy Coordination; Bonds; Transfers;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Limao, Nuno & Saggi, Kamal, 2006. "Tariff retaliation versus financial compensation in the enforcement of international trade agreements," Policy Research Working Paper Series 3873, The World Bank.
  2. Gene M. Grossman & Elhanan Helpman, 1993. "Trade Wars and Trade Talks," NBER Working Papers 4280, National Bureau of Economic Research, Inc.
  3. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-53, March.
  4. Rodney Ludema (Georgetown University) and Anna Maria Mayda (Georgetown University and CEPR), 2005. "Do Countries Free Ride on MFN?," Working Papers, Georgetown University, Department of Economics gueconwpa~05-05-13, Georgetown University, Department of Economics.
  5. Bagwell, Kyle & Mavroidis, Petros C. & Staiger, Robert W., 2007. "Auctioning countermeasures in the WTO," Journal of International Economics, Elsevier, vol. 73(2), pages 309-332, November.
  6. Kyle Bagwell & Robert W. Staiger, 2011. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization," American Economic Review, American Economic Association, vol. 101(4), pages 1238-73, June.
  7. Saggi, Kamal & Yildiz, Halis Murat, 2009. "Bilateralism, multilateralism, and the quest for global free trade," MPRA Paper 17558, University Library of Munich, Germany.
  8. Ornelas, Emanuel, 2005. "Trade creating free trade areas and the undermining of multilateralism," European Economic Review, Elsevier, vol. 49(7), pages 1717-1735, October.
  9. Besedes, Tibor & Prusa, Thomas J., 2011. "The role of extensive and intensive margins and export growth," Journal of Development Economics, Elsevier, vol. 96(2), pages 371-379, November.
  10. Robert Z. Lawrence, 2003. "Crimes and Punishments?: Retaliation under the WTO," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 372, July.
  11. Park, Jee-Hyeong, 2000. "International trade agreements between countries of asymmetric size," Journal of International Economics, Elsevier, vol. 50(2), pages 473-495, April.
  12. Ludema, R.D., 1990. "Optimal International Trade Agreements And Dispute Settlement Procedures," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9101, University of Western Ontario, Department of Economics.
  13. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  14. Kyle Bagwell & Robert W. Staiger, 1997. "An Economic Theory of GATT," NBER Working Papers 6049, National Bureau of Economic Research, Inc.
  15. Schott Jeffrey J, 2009. "America, Europe, and the New Trade Order," Business and Politics, De Gruyter, vol. 11(3), pages 1-24, November.
  16. Marco Bronckers & Naboth van den Broek, 2005. "Financial Compensation in the WTO," Journal of International Economic Law, Oxford University Press, vol. 8(1), pages 101-126, March.
  17. Beshkar, Mostafa, 2010. "Optimal remedies in international trade agreements," European Economic Review, Elsevier, vol. 54(3), pages 455-466, April.
  18. Christian Broda & Nuno Limao & David E. Weinstein, 2008. "Optimal Tariffs and Market Power: The Evidence," American Economic Review, American Economic Association, vol. 98(5), pages 2032-65, December.
  19. Mercurio, Bryan, 2009. "Why compensation cannot replace trade retaliation in the WTO Dispute Settlement Understanding," World Trade Review, Cambridge University Press, Cambridge University Press, vol. 8(02), pages 315-338, April.
  20. Kyle Bagwell & Robert W. Staiger, 2005. "Enforcement, Private Political Pressure, and the General Agreement on Tariffs and Trade/World Trade Organization Escape Clause," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 34(2), pages 471-513, 06.
  21. Kamal Saggi, 2006. "Preferential Trade Agreements And Multilateral Tariff Cooperation ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 29-57, 02.
  22. T.N. Srinivasan, 1999. "Developing Countries in the World Trading System: From GATT, 1947, to the Third Ministerial Meeting of WTO, 1999," The World Economy, Wiley Blackwell, vol. 22(8), pages 1047-1064, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Giordani, Paolo E. & Ruta, Michele, 2013. "Coordination failures in immigration policy," Journal of International Economics, Elsevier, vol. 89(1), pages 55-67.
  2. Paolo E. Giordani & Nadia Rocha & Michele Ruta, 2012. "Food Prices and the Multiplier Effect of Export Policy," Working Papers LuissLab 1297, Dipartimento di Economia e Finanza, LUISS Guido Carli.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:van:wpaper:1115. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.