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The Role of Multilateral Institutions in International Trade Cooperation

Giovanni Maggi

American Economic Review, 1999, vol. 89, issue 1, 190-214

Abstract: The World Trade Organization (WFO) lacks the power to directly enforce agreements. It is, therefore, important to understand what role the WTO can play to facilitate international cooperation and whether a multilateral institution can offer distinct advantages over a web of bilateral agreements. This paper examines two potential benefits of a multilateral trade institution: first, verifying violations of the agreements and informing third parties, thus facilitating multilateral reputation mechanisms; second, promoting multilateral trade negotiations rather than a web of bilateral negotiations. The model suggests that a multilateral approach is particularly important when there are strong imbalances in bilateral trading relationships.

JEL-codes: F13 (search for similar items in EconPapers)
Date: 1999
Note: DOI: 10.1257/aer.89.1.190
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