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Should Credit be Given for Autonomous Liberalization in Multilateral Trade Negotiations?

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  • Mattoo, Aaditya
  • Olarreaga, Marcelo

Abstract

As each new round of multilateral trade negotiations approaches, there is a demand for a negotiating rule that would give credit for autonomous liberalization. This Paper shows that the desirability and feasibility of such a rule depends on when it is instituted. A credit rule established at the beginning of a round of negotiations has primarily a distributional effect, favouring those who have already undertaken liberalization. The implementation of such a rule relies on the generosity of those who have not liberalized. We propose instead the establishment of a credit rule at the end of a round of negotiations, which creates an ex ante assurance that any unilateral liberalization will receive credit in the next round. Such a rule would help induce and/or enhance liberalization between negotiating rounds by reducing the gains from retaining protection as negotiating currency. Moreover, it leads to lower intertemporal average protection in all countries under plausible conditions. Most importantly, such an ex ante rule does not rely on altruism to be generally acceptable.

Suggested Citation

  • Mattoo, Aaditya & Olarreaga, Marcelo, 2001. "Should Credit be Given for Autonomous Liberalization in Multilateral Trade Negotiations?," CEPR Discussion Papers 2821, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2821
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    References listed on IDEAS

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    1. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
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    6. Ingco, Merlinda D., 1995. "Agricultural trade liberalization in the Uruguay Round : one step forward, one step back?," Policy Research Working Paper Series 1500, The World Bank.
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    8. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
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    Citations

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    Cited by:

    1. Kyle Bagwell & Robert W. Staiger, 2013. "Can the Doha Round Be a Development Round? Setting a Place at the Table," NBER Chapters,in: Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, pages 91-124 National Bureau of Economic Research, Inc.
    2. Mattoo, Aaditya & Olarreaga, Marcelo, 2000. "Reciprocity across modes of supply in the World Trade Organization : a negotiating formula," Policy Research Working Paper Series 2373, The World Bank.
    3. Hoekman, Bernard, 2002. "Developing Countries and the Political Economy of the Trading System," WIDER Working Paper Series 126, World Institute for Development Economic Research (UNU-WIDER).
    4. Mattoo, Aaditya, 2001. "Shaping future GATS rules for trade in services," Policy Research Working Paper Series 2596, The World Bank.
    5. Mattoo, Aaditya & Olarreaga, Marcelo, 2000. "Reciprocity Across Modes of Supply in the WTO: A Negotiating Formula," CEPR Discussion Papers 2481, C.E.P.R. Discussion Papers.
    6. Zdzisław W. Puślecki, 2016. "Bilateral trade agreements and the rise of global supply chains," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(5), pages 17-23, October.

    More about this item

    Keywords

    Credit; Unilateral Liberalization; WTO;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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