IDEAS home Printed from https://ideas.repec.org/p/att/wimass/20049.html
   My bibliography  Save this paper

Backward stealing and forward manipulation in the WTO

Author

Listed:
  • Bagwell,K.
  • Staiger,R.W.

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

Abstract

Motivated by the structure of WTO negotiations, we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most-favored-nation (MFN) principle. We identify backward-stealing and forward-manipulation problems that arise when governments bargain under the MFN principle in a sequential fashion. We show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed. We identify the WTO nullification-or-impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems. In this way, we suggest that WTO rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bagwell,K. & Staiger,R.W., 2004. "Backward stealing and forward manipulation in the WTO," Working papers 9, Wisconsin Madison - Social Systems.
  • Handle: RePEc:att:wimass:20049
    as

    Download full text from publisher

    File URL: http://www.ssc.wisc.edu/~rstaiger/accession.wto.revision.0326.2004.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, pages 299-308.
    2. Kyle Bagwell & Robert W. Staiger, 2010. "The World Trade Organization: Theory and Practice," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 223-256, September.
    3. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341, January.
    4. French, Kenneth R. & Poterba, James M., 1991. "Were Japanese stock prices too high?," Journal of Financial Economics, Elsevier, pages 337-363.
    5. 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.
    6. Kowalczyk, Carsten & Sjostrom, Tomas, 1994. "Bringing GATT into the Core," Economica, London School of Economics and Political Science, vol. 61(243), pages 301-317, August.
    7. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, pages 151-175.
    8. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, pages 215-248.
    9. 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.
    10. Hoekman, Bernard M. & Kostecki, Michel M., 2009. "The Political Economy of the World Trading System," OUP Catalogue, Oxford University Press, edition 3, number 9780199553778.
    11. Irwin, Douglas A., 2007. "Tariff Incidence in America's Gilded Age," The Journal of Economic History, Cambridge University Press, vol. 67(03), pages 582-607, September.
    12. Chad P. Bown, 2004. "On the Economic Success of GATT/WTO Dispute Settlement," The Review of Economics and Statistics, MIT Press, pages 811-823.
    13. Nuno Limao, 2006. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," American Economic Review, American Economic Association, pages 896-914.
    14. Leslie M. Marx & Greg Shaffer, 2004. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity: Comment," American Economic Review, American Economic Association, pages 796-801.
    15. Leslie M. Marx & Greg Shaffer, 1999. "Predatory Accommodation: Below-Cost Pricing without Exclusion in Intermediate Goods Markets," RAND Journal of Economics, The RAND Corporation, pages 22-43.
    16. Ludema, Rodney D. & Mayda, Anna Maria, 2009. "Do countries free ride on MFN?," Journal of International Economics, Elsevier, pages 137-150.
    17. John Kennan & Raymond Riezman, 2013. "Do Big Countries Win Tariff Wars?," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 4, pages 45-51 World Scientific Publishing Co. Pte. Ltd..
    18. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, pages 388-401.
    19. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, pages 210-230.
    20. Choi, Jay Pil, 1995. "Optimal tariffs and the choice of technology Discriminatory tariffs vs. the 'Most Favored Nation' clause," Journal of International Economics, Elsevier, pages 143-160.
    21. Saggi, Kamal, 2004. "Tariffs and the most favored nation clause," Journal of International Economics, Elsevier, pages 341-368.
    22. Nuno Limão, 2007. "Are Preferential Trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 821-855.
    23. Michael Tomz & Judith L. Goldstein & Douglas Rivers, 2007. "Do We Really Know That the WTO Increases Trade? Comment," American Economic Review, American Economic Association, pages 2005-2018.
    24. 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, pages 267-267.
    25. Harry G. Johnson, 1953. "Optimum Tariffs and Retaliation," Review of Economic Studies, Oxford University Press, vol. 21(2), pages 142-153.
    26. Bagwell,K. & Staiger,R.W., 1999. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT," Working papers 6, Wisconsin Madison - Social Systems.
    27. Karacaovali, Baybars & Limão, Nuno, 2008. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," Journal of International Economics, Elsevier, pages 299-327.
    28. Kyle Bagwell & Robert W. Staiger, 1997. "Regionalism and Multilateral Tariff Cooperation," NBER Working Papers 5921, National Bureau of Economic Research, Inc.
    29. Ethan Ligon & Laura Schechter, 2003. "Measuring Vulnerability," Economic Journal, Royal Economic Society, vol. 113(486), pages 95-102, March.
    30. Lim“o, Nuno, 2002. "Are Preferential trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?," Royal Economic Society Annual Conference 2002 129, Royal Economic Society.
    31. Ilya Segal, 1999. "Contracting with Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 337-388.
    32. Rodney D. Ludema, 1991. "International Trade Bargaining And The Most-Favored-Nation Clause," Economics and Politics, Wiley Blackwell, vol. 3(1), pages 1-20, March.
    33. McCalman, Phillip, 2002. "Multi-lateral trade negotiations and the Most Favored Nation clause," Journal of International Economics, Elsevier, pages 151-176.
    34. Bagwell, Kyle & Staiger, Robert W., 2005. "Erratum to Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO," Journal of International Economics, Elsevier, pages 268-294.
    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


    Cited by:

    1. repec:smu:ecowpa:1403 is not listed on IDEAS
    2. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, pages 1125-1231.
    3. Euan MacMillan, 2014. "Explaining rising regionalism and failing multilateralism: consensus decision-making and expanding WTO membership," International Economics and Economic Policy, Springer, pages 599-617.
    4. Lake, James & Yildiz, Halis M., 2016. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Journal of International Economics, Elsevier, pages 213-233.
    5. Jeongmeen Suh & Sihoon Nahm & Seung-Gyu Sim, 2016. "The Most Favored Nation Principle: Passive Constraint or Active Commitment?," Korean Economic Review, Korean Economic Association, pages 77-99.
    6. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, pages 295-305.
    7. Kamal Saggi & Woan Foong Wong & Halis Murat Yildiz, 2017. "Preferential Trade Agreements and Rules of the Multilateral Trading System," Working Papers 067, Ryerson University, Department of Economics.
    8. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, pages 1-30.
    9. Jack, William & Levinson, Arik & Rahardja, Sjamsu, 2006. "Employee cost-sharing and the welfare effects of flexible spending accounts," Journal of Public Economics, Elsevier, vol. 90(12), pages 2285-2301, December.
    10. Rodney Ludema and Ann Maria Mayda, 2008. "Do Countries Free Ride on MFN?," Working Papers gueconwpa~08-08-04, Georgetown University, Department of Economics.
    11. Lake, James & Yildiz, Halis M., 2016. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Journal of International Economics, Elsevier, pages 213-233.
    12. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, Elsevier.
    13. Kyle Bagwell & Robert W. Staiger, 2016. "The Design of Trade Agreements," NBER Working Papers 22087, National Bureau of Economic Research, Inc.
    14. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, pages 295-305.
    15. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, pages 1-30.
    16. Ludema, Rodney D. & Mayda, Anna Maria, 2009. "Do countries free ride on MFN?," Journal of International Economics, Elsevier, pages 137-150.
    17. 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.
    18. Nuno Limao, 2006. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," American Economic Review, American Economic Association, pages 896-914.
    19. James Lake, 2016. "Free Trade Agreements as dynamic farsighted networks," Departmental Working Papers 1602, Southern Methodist University, Department of Economics.
    20. Anna Kormilitsina, 2016. "An amplification mechanism in a model of energy," Canadian Journal of Economics, Canadian Economics Association, pages 1425-1440.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:att:wimass:20049. 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: (Ailsenne Sumwalt). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.