Working Paper: NBER ID: w24273
Authors: Kyle Bagwell; Robert W. Staiger; Ali Yurukoglu
Abstract: This paper develops a model of international tariff negotiations to study the design of the institutional rules of the GATT/WTO. We embed a multi-sector model of trade between multiple countries into a model of inter-connected bilateral negotiations over tariffs. Using 1990 trade flows and tariff outcomes from the Uruguay Round of GATT/WTO negotiations, we estimate country-sector productivity levels, sector-level productivity dispersion, iceberg trade costs, and country-pair bargaining parameters. We use the estimated model to simulate an alternative institutional setting for multilateral tariff negotiations in which the most-favored-nation requirement is abandoned. We find that abandonment of the most-favored-nation requirement would result in inefficient over-liberalization of tariffs and a deterioration in world-wide welfare relative to the negotiated outcomes in the presence of the most-favored-nation requirement.
Keywords: Tariff Negotiations; GATT; WTO; Trade Policy
JEL Codes: F11; F13; L4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| abandonment of MFN requirement (F13) | inefficient over-liberalization of tariffs (F13) |
| inefficient over-liberalization of tariffs (F13) | negative impact on worldwide welfare (F69) |
| abandonment of MFN requirement (F13) | negative impact on worldwide welfare (F69) |
| discriminatory tariff reductions (F13) | negative spillovers (D62) |
| average tariffs decrease under discriminatory negotiations (F13) | lower overall welfare (D69) |