Trade, Political Distance and the World Trade Organization

Samuel Hardwick

Papers from arXiv.org

Abstract: Trade agreements are often understood as shielding commerce from fluctuations in political relations. This paper provides evidence that World Trade Organization membership reduces the penalty of political distance on trade at the extensive margin. Using a structural gravity framework covering 1948 to 2023 and two measures of political distance, based on high-frequency events data and UN General Assembly votes, GATT/WTO status is consistently associated with a wider range of products traded between politically distant partners. The association is strongest in the early WTO years (1995 to 2008). Events-based estimates also suggest attenuation at the intensive margin, while UN vote-based estimates do not. Across all specifications, GATT/WTO membership increases aggregate trade volumes. The results indicate that a function of the multilateral trading system has been to foster new trade links across political divides, while raising trade volumes among both close and distant partners.

Date: 2025-09
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