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Backward stealing and forward manipulation in the WTO

  • Bagwell,K.
  • Staiger,R.W.

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

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.

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File URL: http://www.ssc.wisc.edu/~rstaiger/accession.wto.revision.0326.2004.pdf
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Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9.

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Date of creation: 2004
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Handle: RePEc:att:wimass:20049
Contact details of provider: Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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