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What do trade negotiators negotiate about? Empirical evidence from the World Trade Organization

  • Kyle Bagwell

    ()

    (Department of Economics, Columbia University)

  • Robert W. Staiger

    ()

    (University of Wisconsin - Madison - Department of Economics)

What do trade negotiators negotiate about? There are two distinct theoretical approaches in the economics literature that offer an answer to this question: the terms-of-trade theory and the commitment theory. The terms of-trade theory holds that trade agreements are useful to governments as a means of helping them escape from a terms-of-trade-driven Prisoners' Dilemma. The commitment theory holds that trade agreements are useful to governments as a means of helping them make commitments to the private sector. These theories are not mutually exclusive, but there is little direct evidence on the empirical relevance of either. We attempt to investigate empirically the purpose served by market access commitments negotiated in the World Trade Organization. We find broad support for the terms-of-trade theory in the data. We claim more tentatively to find support in the data for the commitment theory as well.

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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0607-04.

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Length: 67 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:clu:wpaper:0607-04
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