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The WTO Promotes Trade, Strongly But Unevenly

  • Subramanian, Arvind
  • Wei, Shang-Jin

This paper furnishes robust evidence that the WTO has had a powerful and positive impact on trade, amounting to about 120% of additional world trade (or US$8 trillion in 2003 alone). The impact has, however, been uneven. This, in many ways, is consistent with theoretical models of the GATT/WTO. The theory suggests that the impact of a country’s membership in the GATT/WTO depends on what the country does with its membership, with whom it negotiates, and which products the negotiation covers. Using a properly specified gravity model, we find evidence consistent with these predictions. First, industrial countries that participated more actively than developing countries in reciprocal trade negotiations witnessed a large increase in trade. Second, bilateral trade was greater when both partners undertook liberalization than when only one partner did. Third, sectors that did not witness liberalization did not see an increase in trade.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5122.

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Date of creation: Jul 2005
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Handle: RePEc:cpr:ceprdp:5122
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  1. Reuven Glick & Andrew K. Rose, 2001. "Does a currency union affect trade? the time series evidence," Working Paper Series 2001-13, Federal Reserve Bank of San Francisco.
  2. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
  3. Wolf, Martin, 1987. "Differential and More Favorable Treatment of Developing Countries and the International Trading System," World Bank Economic Review, World Bank Group, vol. 1(4), pages 647-68, September.
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  5. Andrew Rose, 2005. "Does the WTO Make Trade More Stable?," Open Economies Review, Springer, vol. 16(1), pages 7-22, January.
  6. Andrew K. Rose, 2002. "Do We Really Know that the WTO Increases Trade?," NBER Working Papers 9273, National Bureau of Economic Research, Inc.
  7. Aaditya Mattoo & Devesh Roy & Arvind Subramanian, 2003. "The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?," The World Economy, Wiley Blackwell, vol. 26(6), pages 829-851, 06.
  8. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
  9. Panagariya, Arvind & Rodrik, Dani, 1993. "Political-Economy Arguments for a Uniform Tariff," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 685-703, August.
  10. Bagwell, Kyle & Staiger, Robert W., 2005. "Erratum to "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO" [J. Int. Econ. 63 (1) (2004) 1-29]," Journal of International Economics, Elsevier, vol. 67(2), pages 267-267, December.
  11. Kyle Bagwell & Robert W. Staiger, 2002. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO," Discussion Papers 0102-37, Columbia University, Department of Economics.
  12. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  13. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  14. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  15. Mattoo, Aaditya & Subramanian, Arvind, 2004. "The WTO and the poorest countries: the stark reality," World Trade Review, Cambridge University Press, vol. 3(03), pages 385-407, November.
  16. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
  17. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  18. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341, June.
  19. repec:rus:hseeco:123147 is not listed on IDEAS
  20. Rose, Andrew K, 2002. "Do WTO Members have More Liberal Trade Policy?," CEPR Discussion Papers 3659, C.E.P.R. Discussion Papers.
  21. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, May.
  22. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 433-462, October.
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