Working Paper: NBER ID: w12727
Authors: Kyle Bagwell; Robert W. Staiger
Abstract: What do trade negotiators negotiate about? There are two distinct theoretical approaches in the economics literature that offer an answer to this question: the terms-of-trade theory and the commitment theory. The terms-of-trade theory holds that trade agreements are useful to governments as a means of helping them escape from a terms-of-trade-driven Prisoners' Dilemma. The commitment theory holds that trade agreements are useful to governments as a means of helping them make commitments to the private sector. These theories are not mutually exclusive, but there is little direct evidence on the empirical relevance of either. We attempt to investigate empirically the purpose served by market access commitments negotiated in the World Trade Organization. We find broad support for the terms-of-trade theory in the data. We claim more tentatively to find support in the data for the commitment theory as well.
Keywords: trade negotiations; terms-of-trade theory; commitment theory; WTO
JEL Codes: F02; F1; F11; F13; F15; F5; F51; F53; F59
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| larger import volumes (F10) | larger tariff concessions (F13) |
| the WTO (F13) | reducing tariffs (F13) |