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Multilateral trade negotiations, bilateral opportunism and the rules of GATT

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  • Bagwell,K.
  • Staiger,R.W.

    (University of Wisconsin-Madison, Social Systems Research Institute)

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bagwell,K. & Staiger,R.W., 1999. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT," Working papers 6, Wisconsin Madison - Social Systems.
  • Handle: RePEc:att:wimass:19996
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    File URL: http://www.ssc.wisc.edu/econ/archive/wp9906.pdf
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    Citations

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    Cited by:

    1. Mohammad Amin, 2004. "Time Inconsistency of Trade Policy and Multilateralism," International Trade 0402002, EconWPA.
    2. Cebi, Pinar & Ludema, Rodney, 2002. "The Rise and Fall of the Most-Favored-Nation Clause," Working Papers 15853, United States International Trade Commission, Office of Economics.
    3. Bagwell,K. & Staiger,R.W., 2000. "GATT-think," Working papers 19, Wisconsin Madison - Social Systems.
    4. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, pages 1-30.
    5. Ronald Fischer & Martín Osorio, 2002. "Why Do We Need Antidumping Rules?," Documentos de Trabajo 134, Centro de Economía Aplicada, Universidad de Chile.
    6. Bagwell, Kyle & Staiger, Robert W., 2010. "Backward stealing and forward manipulation in the WTO," Journal of International Economics, Elsevier, pages 49-62.
    7. Horn, Henrik & Mavroidis, Petros C., 2001. "Economic and legal aspects of the Most-Favored-Nation clause," European Journal of Political Economy, Elsevier, pages 233-279.
    8. Kyle Bagwell & Robert W. Staiger, 2012. "Profit Shifting And Trade Agreements In Imperfectly Competitive Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1067-1104, November.
    9. Bown, Chad P. & Crowley, Meredith A., 2007. "Trade deflection and trade depression," Journal of International Economics, Elsevier, pages 176-201.
    10. Siem Jan Koopman & Marius Ooms, 2003. "Time Series Modelling of Daily Tax Revenues," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, pages 439-469.
    11. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, pages 1-30.
    12. 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.
    13. Bown, Chad P. & Crowley, Meredith A., 2007. "Trade deflection and trade depression," Journal of International Economics, Elsevier, pages 176-201.
    14. Chad P. Bown & Meredith A. Crowley, 2004. "China's export growth and U.S. trade policy," Working Paper Series WP-04-28, Federal Reserve Bank of Chicago.
    15. Wolfgang Pesendorfer & Asher Wolinsky, 2003. "Second Opinions and Price Competition: Inefficiency in the Market for Expert Advice," Review of Economic Studies, Oxford University Press, pages 417-437.
    16. Wilfred J. Ethier, 2002. "Unilateralism in a Multilateral World," Economic Journal, Royal Economic Society, vol. 112(479), pages 266-292, April.
    17. Meredith A. Crowley, 2003. "An introduction to the WTO and GATT," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 42-57.

    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration

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