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An Economic Theory of GATT

Kyle Bagwell and Robert Staiger ()

No 6049, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite the important roel played by GATT in the world economy, economist have nto developed a unified theoretical framework that interprets and evaluates the principles that form the foundation of GATT. Our purpose here is to propose such a framework. Working within a general equilibrium trade model, we represent government preferences with a very general formulation that includes all the major political-economy models of trade policy as special cases. Using this general framework we establish three key results. First, GATT's principle of reciprocity can by viewed as a mechanism for implementing efficient trade agreements. Second, through the principle of reciprocity countries can implement efficient trade agreements if and only if they also abide by the principle of nondiscrimination. And third, preferential agreements undermine GATT's ability to deliver efficient multilateral outcomes through the principle of reciprocity, unless these agreements take the form of customs unions among partners that are sufficiently similar.

JEL-codes: F02 F13 (search for similar items in EconPapers)
Date: 1997-05
Note: ITI
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Published as American Economic Review (March 1999).

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Journal Article: An Economic Theory of GATT (1999) Downloads
Working Paper: An economic theory of GATT (1998) Downloads
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