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The WTO promotes trade, strongly but unevenly

  • Subramanian, Arvind
  • Wei, Shang-Jin

This paper furnishes robust evidence that the WTO has had a powerful and positive impact on trade, amounting to about 120% of additional world trade (or US$8 trillion in 2003 alone). The impact has, however, been uneven. This, in many ways, is consistent with theoretical models of the GATT/WTO. The theory suggests that the impact of a country’s membership in the GATT/WTO depends on what the country does with its membership, with whom it negotiates, and which products the negotiation covers. Using a properly specified gravity model, we find evidence consistent with these predictions. First, industrial countries that participated more actively than developing countries in reciprocal trade negotiations witnessed a large increase in trade. Second, bilateral trade was greater when both partners undertook liberalization than when only one partner did. Third, sectors that did not witness liberalization did not see an increase in trade.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 72 (2007)
Issue (Month): 1 (May)
Pages: 151-175

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Handle: RePEc:eee:inecon:v:72:y:2007:i:1:p:151-175
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. Andrew K. Rose, 2004. "Does the WTO Make Trade More Stable?," NBER Working Papers 10207, National Bureau of Economic Research, Inc.
  2. Reuven Glick & Andrew K. Rose, 2001. "Does a currency union affect trade? the time series evidence," Working Paper Series 2001-13, Federal Reserve Bank of San Francisco.
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  6. 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.
  7. Mattoo, Aaditya & Subramanian, Arvind, 2004. "The WTO and the poorest countries: the stark reality," World Trade Review, Cambridge University Press, vol. 3(03), pages 385-407, November.
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  10. Andrew K. Rose, 2002. "Do We Really KNow that the WTO Increases Trade?," Working Papers 182002, Hong Kong Institute for Monetary Research.
  11. Kyle Bagwell & Robert W. Staiger, 2002. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO," Discussion Papers 0102-37, Columbia University, Department of Economics.
  12. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
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  14. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
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  16. 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.
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  20. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, May.
  21. 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.
  22. 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.
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