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Should credit be given for autonomous liberalization in multilateral trade negotiations?

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  • Mattoo, Aaditya
  • Olarreaga, Marcelo

Abstract

As each new round of multilateral trade negotiations approaches, there is a demand for a negotiating rule that would give credit for autonomous (unilateral) liberalization. The authors show that the feasibility, and desirability of such a rule depend on when it is instituted. A credit rule established at the beginning of a round of negotiations has a primarily distributional effect, favoringthose who have already undertaken liberalization. Implementing such a rule would depend on the generosity of those who have not liberalized. The authors propose instead establishing a credit rule at the end of a round of negotiations, which creates an ex-ante assurance that any unilateral liberalization will receive credit in the next round. Such a rule would help induce, or enhance liberalization in some countries between negotiating rounds, by reducing the gains from retaining protection as negotiating currency. More strikingly, it could also lead to deeper levels of multilateral liberalization, and induce other countries to go further than they would in the absence of a rule. Most important, such an ex-ante rule would not rely on altruism to be generally acceptable.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2374.

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Date of creation: 30 Jun 2000
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Handle: RePEc:wbk:wbrwps:2374

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Keywords: Environmental Economics&Policies; Economic Theory&Research; Insurance&Risk Mitigation; Payment Systems&Infrastructure; Financial Crisis Management&Restructuring; Agricultural Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Economic Theory&Research; Environmental Economics&Policies; Insurance&Risk Mitigation;

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References

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  1. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(4), pages 675-708, August.
  2. Kyle Bagwell & Robert W. Staiger, 1997. "An Economic Theory of GATT," NBER Working Papers 6049, National Bureau of Economic Research, Inc.
  3. Chang, Won & Winters, L. Alan, 1999. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2179, C.E.P.R. Discussion Papers.
  4. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, Elsevier, vol. 47(2), pages 345-370, April.
  6. repec:dgr:uvatin:2098059 is not listed on IDEAS
  7. Ingco, Merlinda D., 1995. "Agricultural trade liberalization in the Uruguay Round : one step forward, one step back?," Policy Research Working Paper Series, The World Bank 1500, The World Bank.
  8. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 190-214, March.
  9. Joseph F. Francois & Will Martin, 1998. "Commercial Policy Uncertainty, the Expected Cost of Protection, and Market Access," Tinbergen Institute Discussion Papers, Tinbergen Institute 98-059/2, Tinbergen Institute.
  10. Olarreaga, Marcelo & Soloaga, Isidro & Winters, Alan, 1999. "What's behind MERCOSUR's common external tariff?," Policy Research Working Paper Series, The World Bank 2231, The World Bank.
  11. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, Elsevier, vol. 23(3-4), pages 357-367, November.
  12. Winters, L. Alan & Chang, Won, 2000. "Regional integration and import prices: an empirical investigation," Journal of International Economics, Elsevier, Elsevier, vol. 51(2), pages 363-377, August.
  13. repec:dgr:uvatin:1998059 is not listed on IDEAS
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Cited by:
  1. Kyle Bagwell & Robert W. Staiger, 2013. "Can the Doha Round be a Development Round? Setting a Place at the Table," NBER Chapters, National Bureau of Economic Research, Inc, in: Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, pages 91-124 National Bureau of Economic Research, Inc.
  2. Mattoo, Aaditya & Olarreaga, Marcelo, 2000. "Reciprocity across modes of supply in the World Trade Organization : a negotiating formula," Policy Research Working Paper Series, The World Bank 2373, The World Bank.
  3. Hoekman, Bernard, 2002. "Developing Countries and the Political Economy of the Trading System," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Mattoo, Aaditya & Olarreaga, Marcelo, 2000. "Reciprocity Across Modes of Supply in the WTO: A Negotiating Formula," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2481, C.E.P.R. Discussion Papers.
  5. Mattoo, Aaditya, 2001. "Shaping future GATS rules for trade in services," Policy Research Working Paper Series, The World Bank 2596, The World Bank.

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