Working Paper: CEPR ID: DP4508
Authors: Paola Conconi; Carlo Perroni
Abstract: We examine the theoretical rationale for the simultaneous granting of temporary Special and Differential (S&D) treatment to developing countries - both in ite protection and market-access components - under the WTO agreements. S&D rules constitute the centrepiece of the WTO?s strategy for integrating developing countries into the trading system, but have been criticized?both on theoretical and empirical grounds?as being ineffective. We show that seemingly non-reciprocal, limited-duration S&D treatment can be rationalized as a transitional equilibrium feature of a self-enforcing international agreement between a large developed and a small developing country, where the two sides have a joint interest in helping the developing country to overcome a policy commitment problem.
Keywords: international agreements; policy commitment; trade; development
JEL Codes: D72; D78; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SD treatment (C22) | trade liberalization (F13) |
| commitment problem (D70) | trade cooperation (F13) |
| temporary SD treatment (C22) | stabilize trade policies (F13) |
| SD provisions (H53) | facilitate gradual transition towards trade liberalization (F13) |
| temporary concessions (Z38) | future market access (L17) |
| credible threat of punishment (K42) | sustain cooperation (C71) |
| commitment problem (D70) | higher initial protection levels (Y20) |
| SD provisions (H53) | foster cooperation (C71) |