What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization

Kyle Bagwell and Robert W. Staiger ()

No 12727, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F02 F1 F11 F13 F15 F5 F51 F53 F59 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-pol
Date: 2006-12
Note: ITI
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