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Backward stealing and forward manipulation in the WTO

  • Kyle Bagwell


    (Department of Economics, Columbia University)

  • Robert W. Staiger


    (University of Wisconsin - Madison - Department of Economics)

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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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0405-06.

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Length: 56 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:clu:wpaper:0405-06
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