When Will WTO Membership Signal Commitment to Free Trade by A Developing Country

S. Mansoob Murshed ()
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S. Mansoob Murshed: Institute of Social Studies, Postal: Institute of Social Studies (ISS), PO Box 29776, 2502 LT The Hague, Netherlands,

Journal of Economic Integration, 2004, vol. 19, 317-331

Abstract:

A signalling game involving three parties: a developing country, the WTO and a developed country is outlined. The developing country might be tempted to renege or deviate from free trade. Although the costs of reneging from free trade result in a loss of credibility, the costs come in the future and are discounted. Short-term gains include revenues from import taxes that are important to the public finances of low-income countries. Membership of a rules based organisation such as the WTO can act as a credible commitment device. In these circumstances, however, the South’s commitment to free trade depends upon a clear signal from the North that it too is committed to free trade. Otherwise the South will continue to deviate from optimal and freer trade policies.

Keywords: WTO; North-South trade; Commitment; Delegation (search for similar items in EconPapers)
JEL-codes: C72 D84 F13 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0277

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