Working Paper: CEPR ID: DP5122
Authors: Arvind Subramanian; Shangjin Wei
Abstract: This paper furnishes robust evidence that the WTO has had a powerful and positive impact on trade, amounting to about 120% of additional world trade (or US$8 trillion in 2003 alone). The impact has, however, been uneven. This, in many ways, is consistent with theoretical models of the GATT/WTO. The theory suggests that the impact of a country’s membership in the GATT/WTO depends on what the country does with its membership, with whom it negotiates, and which products the negotiation covers. Using a properly specified gravity model, we find evidence consistent with these predictions. First, industrial countries that participated more actively than developing countries in reciprocal trade negotiations witnessed a large increase in trade. Second, bilateral trade was greater when both partners undertook liberalization than when only one partner did. Third, sectors that did not witness liberalization did not see an increase in trade.
Keywords: GATT; Special and Differential Treatment
JEL Codes: F10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| WTO membership (F13) | increase in trade (F19) |
| active participation in reciprocal trade negotiations (F13) | increase in trade (F19) |
| bilateral trade liberalization (both partners) (F10) | greater trade (F19) |
| absence of liberalization (F69) | stagnation in trade (F19) |