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‘GATT-Think’ with Asymmetric Countries

Author

Listed:
  • Paolo Epifani

    (CESPRI
    University of Parma.)

  • Juliette Vitaloni

    (CESPRI)

Abstract

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

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    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.
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    12. Carlo Perroni & John Whalley, 2000. "The new regionalism: trade liberalization or insurance?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(1), pages 1-24, February.
    13. John Kennan & Raymond Riezman, 2013. "Do Big Countries Win Tariff Wars?," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 4, pages 45-51, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Florian Freund, 2017. "Reciprocal Tariff Reductions Under Asymmetric Bargaining Power," The World Economy, Wiley Blackwell, vol. 40(5), pages 978-992, May.
    2. 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.
    3. Jean-Marc Malambwe Kilolo, 2018. "An elementary model of export tax war," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(2), pages 307-325, May.
    4. Pascalis Raimondos & Alan D. Woodland, 2011. "Reciprocity, World Prices and Welfare," CESifo Working Paper Series 3607, CESifo.

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    More about this item

    Keywords

    Reciprocity; Trade negotiations; Trade dependence; Nash bargaining solution.;
    All these keywords.

    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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