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Domestic Policies, National Sovereignty and International Economic Institutions

  • Kyle Bagwell
  • Robert W. Staiger

To what extent must nations cede control over their economic and social policies if global efficiency is to be achieved in an interdependent world? This question is at the center of the debate over the future role of GATT (and its successor, the WTO) in the realm of labor and environmental standards. Current GATT rules reflect the primacy of market access concerns in GATT practice, and this orientation is seen increasingly as unfriendly to labor and environmental causes. Fundamental changes to GATT are being considered as a result, changes that would expand the scope of GATT negotiations to include labor and environmental policies, and would lead to a significant loss of sovereignty for national governments. In this paper we establish that there is no need for the WTO to expand the scope of its negotiations in this way. We show instead that the market access focus of current GATT rules is well-equipped to handle the problems associated with choices over labor and environmental standards, and that with relatively modest changes that grant governments more sovereignty, not less, these rules can in principle deliver globally efficient outcomes.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7293.

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Date of creation: Aug 1999
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Publication status: published as Bagwell, Kyle and Robert W. Staiger. "Domestic Policies, National Sovereignty, And International Economic Institutions," Quarterly Journal of Economics, 2001, v116(2,May), 519-562.
Handle: RePEc:nbr:nberwo:7293
Note: ITI
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  1. Kyle Bagwell & Robert W. Staiger, 1996. "Reciprocal Trade Liberalization," Discussion Papers 1150, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Bagwell,K. & Staiger,R.W., 1998. "The simple economics of labor standards and the Gatt," Working papers 9, Wisconsin Madison - Social Systems.
  3. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
  4. Spagnolo, G., 1999. "Issue Linkage, Delegation, and International Policy Cooperation," Cambridge Working Papers in Economics 9913, Faculty of Economics, University of Cambridge.
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