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A 'New Trade' Theory of GATT/WTO Negotiations

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  • Ralph Ossa

Abstract

I develop a novel theory of GATT/WTO negotiations. This theory provides new answers to two prominent questions in the trade policy literature: first, what is the purpose of trade negotiations? And second, what is the role played by the fundamental GATT/WTO principles of reciprocity and nondiscrimination? Relative to the standard terms-of-trade theory of GATT/WTO negotiations, my theory makes two main contributions: first, it builds on a 'new trade' model rather than the neoclassical trade model and therefore sheds new light on GATT/WTO negotiations between similar countries. Second, it relies on a production relocation externality rather than the terms-of-trade externality and therefore demonstrates that the terms-of-trade externality is not the only trade policy externality which can be internalized in GATT/WTO negotiations.

Suggested Citation

  • Ralph Ossa, 2008. "A 'New Trade' Theory of GATT/WTO Negotiations," CEP Discussion Papers dp0877, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0877
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    Keywords

    Trade negotiations; GATT/WTO; New trade theory;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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