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‘GATT-Think’ with Asymmetric Countries


  • Paolo Epifani

    () (CESPRI
    University of Parma.)

  • Juliette Vitaloni

    () (CESPRI)


We argue that, in the presence of asymmetric countries, a trade agreement that conforms to GATT’s reciprocity rule allows the (stronger) less trade dependent country to improve its welfare relative to both the free trade and the trade war. Conversely, the (weaker) more trade dependent country cannot reach the free trade welfare level under reciprocity, although its welfare improves relative to the trade war. Reciprocity is so unfavorable to the weaker country that it maybeworse o .under reciprocity than under the Nash bargaining solution, a 'power-based' approach to trade negotiations that reflects power asymmetries among trading partners. Our results question Bagwell and Staiger (1999, 2000)’s view of reciprocity as a rule that "serves to mitigate the influence of power asymmetries on negotiated outcomes".

Suggested Citation

  • Paolo Epifani & Juliette Vitaloni, 2003. "‘GATT-Think’ with Asymmetric Countries," KITeS Working Papers 141, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2003.
  • Handle: RePEc:cri:cespri:wp141

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    References listed on IDEAS

    1. Richard E. Baldwin, 1997. "The Causes of Regionalism," The World Economy, Wiley Blackwell, vol. 20(7), pages 865-888, November.
    2. Bagwell, K. & Staiger, R.W., 1996. "Reciprocal Trade Liberalization," Working papers 9602, Wisconsin Madison - Social Systems.
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    4. Bagwell, Kyle & Staiger, Robert W., 2001. "Reciprocity, non-discrimination and preferential agreements in the multilateral trading system," European Journal of Political Economy, Elsevier, vol. 17(2), pages 281-325, June.
    5. Paul R. Krugman, 1991. "The move toward free trade zones," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-58.
    6. Bagwell,K. & Staiger,R.W., 2000. "GATT-think," Working papers 19, Wisconsin Madison - Social Systems.
    7. Michalopoulos,Constantine, 1999. "Trade policy and market access issues for developing countries : implications for the Millennium Round," Policy Research Working Paper Series 2214, The World Bank.
    8. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-153, March.
    9. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
    10. Park, Jee-Hyeong, 2000. "International trade agreements between countries of asymmetric size," Journal of International Economics, Elsevier, vol. 50(2), pages 473-495, April.
    11. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    12. Carlo Perroni & John Whalley, 2000. "The new regionalism: trade liberalization or insurance?," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 1-24, February.
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    14. McLaren, John, 1997. "Size, Sunk Costs, and Judge Bowker's Objection to Free Trade," American Economic Review, American Economic Association, vol. 87(3), pages 400-420, June.
    15. Eric W. Bond & Jee-Hyeong Park, 2002. "Gradualism in Trade Agreements with Asymmetric Countries," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 379-406.
    16. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-837, December.
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    Cited by:

    1. Euan MacMillan, 2014. "Explaining rising regionalism and failing multilateralism: consensus decision-making and expanding WTO membership," International Economics and Economic Policy, Springer, vol. 11(4), pages 599-617, December.
    2. Pascalis Raimondos-Møller & Alan D. Woodland, 2011. "Reciprocity, World Prices and Welfare," CESifo Working Paper Series 3607, CESifo Group Munich.

    More about this item


    Reciprocity; Trade negotiations; Trade dependence; Nash bargaining solution.;

    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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