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Should credit be given for autonomous liberalization in multilateral trade negotiations?

  • Mattoo, Aaditya
  • Olarreaga, Marcelo

As each new round of multilateral trade negotiations approaches, there is a demand for a negotiating rule that would give credit for autonomous (unilateral) liberalization. The authors show that the feasibility, and desirability of such a rule depend on when it is instituted. A credit rule established at the beginning of a round of negotiations has a primarily distributional effect, favoringthose who have already undertaken liberalization. Implementing such a rule would depend on the generosity of those who have not liberalized. The authors propose instead establishing 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, or enhance liberalization in some countries between negotiating rounds, by reducing the gains from retaining protection as negotiating currency. More strikingly, it could also lead to deeper levels of multilateral liberalization, and induce other countries to go further than they would in the absence of a rule. Most important, such an ex-ante rule would not rely on altruism to be generally acceptable.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2374.

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Date of creation: 30 Jun 2000
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Handle: RePEc:wbk:wbrwps:2374
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  1. Winters, L. Alan & Chang, Won, 2000. "Regional integration and import prices: an empirical investigation," Journal of International Economics, Elsevier, vol. 51(2), pages 363-377, August.
  2. Chang, Won & Winters, L. Alan, 1999. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," CEPR Discussion Papers 2179, C.E.P.R. Discussion Papers.
  3. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
  4. 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.
  5. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  6. Olarreaga, Marcelo & Soloaga, Isidro & Winters, Alan, 1999. "What's behind MERCOSUR's common external tariff?," Policy Research Working Paper Series 2231, The World Bank.
  7. repec:dgr:uvatin:2098059 is not listed on IDEAS
  8. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, vol. 47(2), pages 345-370, April.
  9. 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.
  10. repec:dgr:uvatin:1998059 is not listed on IDEAS
  11. repec:dgr:uvatin:19980059 is not listed on IDEAS
  12. 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.
  13. 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.
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