The Balance of Concessions in Trade Agreements

Mostafa Beshkar (), Pao-Li Chang () and Shenxi Song ()
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Mostafa Beshkar: Department of Economics, Indiana University
Pao-Li Chang: School of Economics, Singapore Management University
Shenxi Song: Lazada South East Asia

No 5-2024, Economics and Statistics Working Papers from Singapore Management University, School of Economics

Abstract: This paper introduces a quantitative framework to analyze the WTO’s reciprocity principle. Utilizing two polar bargaining environments, we measure terms-of-trade concessions among WTO members and examine how shifts in applied tariffs and economic fundamentals affect bilateral and multilateral balance of concessions. We find significant disparities in concessions, largely driven by the rise in trade imbalances since the early 1990s. Notably, although US-China bilateral tariffs suggest considerable terms-of-trade benefits for China, under a hypothetical balanced trade scenario, their relationship evolves towards near reciprocity following China’s accession to the WTO. Furthermore, in contrast to the significant gains in its relationship with the US, China experiences a terms-of-trade loss in its bilateral relationships with other WTO members. Lastly, we offer insights into the magnitude of concessions exchanged by countries at different levels of development.

JEL-codes: C51 C54 F13 F14 F15 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2024-05-30
New Economics Papers: this item is included in nep-cna, nep-gth, nep-int and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:ris:smuesw:2024_005

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