Should Credit be Given for Autonomous Liberalization in Multilateral Trade Negotiations?

Aaditya Mattoo and Marcelo Olarreaga

No 2821, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: As each new round of multilateral trade negotiations approaches, there is a demand for a negotiating rule that would give credit for autonomous liberalization. This Paper shows that the desirability and feasibility of such a rule depends on when it is instituted. A credit rule established at the beginning of a round of negotiations has primarily a distributional effect, favouring those who have already undertaken liberalization. The implementation of such a rule relies on the generosity of those who have not liberalized. We propose instead the establishment of a credit rule at the end of a round of negotiations, which creates an ex ante assurance that any unilateral liberalization will receive credit in the next round. Such a rule would help induce and/or enhance liberalization between negotiating rounds by reducing the gains from retaining protection as negotiating currency. Moreover, it leads to lower intertemporal average protection in all countries under plausible conditions. Most importantly, such an ex ante rule does not rely on altruism to be generally acceptable.

Keywords: Credit; Unilateral liberalization; Wto (search for similar items in EconPapers)
JEL-codes: F02 F13 F15 (search for similar items in EconPapers)
Date: 2001-04
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Citations: View citations in EconPapers (5)

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