The economics of the world trading system

Library	Item Barcode	Call Number	Material Type	Item Category 1	Status
Searching... PSZ JB	30000004304824	HF1379 B33 2002	Open Access Book	Book	Searching... Unknown
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World trade is governed by the rules of the World Trade Organization (WTO), the successor to the General Agreement on Tariffs and Trade (GATT). The WTO sets rules of conduct for the international trade of goods and services and for intellectual property rights, provides a forum for multinational negotiations to resolve trade problems, and has a formal mechanism for dispute settlement. It is the primary institution working, through rule-based bargaining, at freeing trade.

In this book, Kyle Bagwell and Robert Staiger provide an economic analysis and justification for the purpose and design of the GATT/WTO. They summarize their own research, discuss the major features of the GATT agreement, and survey the literature on trade agreements. Their focus on the terms-of-trade externality is particularly original and ties the book together. Topics include the theory of trade agreements, the origin and design of the GATT and the WTO, the principles of reciprocity, the most favored nation principle, terms-of-trade theory, enforcement, preferential trade agreements, labor and environmental standards, competition policy, and agricultural export subsidies.

Author Notes

Kyle Bagwell is Kelvin J. Lancaster Professor of Economic Theory at Columbia University and Professor of Finance and Economics at Columbia's School of Business
Robert W. Staiger is Professor of Economics at the University of Wisconsin. Both are Research Associates at the National Bureau of Economic Research

Reviews 1

Choice Review

In this valuable volume, Bagwell (Columbia Univ.) and Staiger (Univ. of Wisconsin) explain aspects of the postwar international trade policy architecture--notably the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO)--in terms of the resolution of externalities linked to the terms of trade. The authors propose elegant theoretical constructs that make their point and that represent an interesting addition to the literature on commercial policy. The volume begins with the theory of international trade agreements and then nicely links the theory to the history of the GATT and the WTO. Succeeding chapters focus on the key issues of reciprocity, most-favored-nation treatment, enforcement, preferential trading arrangements, labor and environmental standards, competition policy, and agricultural export subsidies. All of this is nicely framed in various models without being detached from the real world of commercial diplomacy. Consequently, this is an important contribution to the literature. Extensive references. Summing Up: Highly recommended. Upper-division undergraduate through faculty collections on international trade. I. Walter New York University

Preface	p. xi
1 Introduction	p. 1
2 The Theory of Trade Agreements	p. 13
2.1 The Purpose of Trade Agreements	p. 13
2.1.1 The General Equilibrium Model	p. 14
2.1.2 The Traditional Economic Approach	p. 15
2.1.3 The Political-Economy Approach	p. 18
2.1.4 The Commitment Approach	p. 32
2.1.5 Comparison of Approaches	p. 35
2.2 Rules versus Power	p. 36
2.3 Enforcement	p. 39
3 The History and Design of GATT and the WTO	p. 43
3.1 The Origin of GATT and the WTO	p. 43
3.2 The Rules of GATT	p. 48
3.2.1 Substantive Obligations	p. 48
3.2.2 Exceptions	p. 49
3.2.3 Dispute Settlement Procedures	p. 51
3.3 Reciprocity, Nondiscrimination, and Enforcement under GATT	p. 54
4 Reciprocity	p. 57
4.1 Reciprocity in GATT	p. 57
4.2 Reciprocity and Trade Negotiations	p. 59
4.3 Reciprocity and Renegotiation	p. 64
4.4 Reciprocity and Participation: Rules versus Power	p. 68
5 MFN	p. 71
5.1 MFN in GATT	p. 71
5.2 The Multicountry Model	p. 73
5.2.1 The General Equilibrium Model	p. 73
5.2.2 Government Preferences	p. 77
5.3 MFN, Reciprocity, and Trade Negotiations	p. 79
5.3.1 Significance	p. 80
5.3.2 MFN and Reciprocity	p. 81
5.3.3 Nonviolation Nullification-or-Impairment Complaints	p. 84
5.3.4 The Free-Rider Problem	p. 86
5.4 MFN, Reciprocity and Renegotiation	p. 89
5.5 MFN and the Terms-of-Trade Theory: A Summary	p. 92
5.6 MFN and Political Externalities	p. 94
6 Enforcement	p. 95
6.1 GATT Enforcement and the Theory of Repeated Games	p. 95
6.2 Predictions	p. 103
6.2.1 Rebalancing the Agreement: The GATT Escape Clause	p. 104
6.2.2 Gradualism: Rounds of Trade Liberalization	p. 106
6.3 The Exchange and Aggregation of Enforcement Power	p. 108
7 Preferential Trading Agreements	p. 111
7.1 Preferential Trading Agreements in GATT	p. 111
7.2 Preferential Trading Agreements and Reciprocity	p. 112
7.2.1 PTAs and Trade Negotiations	p. 113
7.2.2 PTAs and Renegotiation	p. 114
7.3 Preferential Trading Agreements and Multilateral Enforcement	p. 115
7.4 Other Approaches	p. 121
8 Labor and Environmental Standards	p. 125
8.1 Labor and Environmental Standards in GATT	p. 125
8.2 The Model with Domestic Standards	p. 131
8.2.1 The General Equilibrium Model	p. 131
8.2.2 Government Preferences	p. 133
8.3 The Purpose of a Trade Agreement	p. 133
8.3.1 Efficient Policies	p. 134
8.3.2 Noncooperative Policies	p. 135
8.3.3 Identifying the Inefficiency	p. 136
8.4 Trade Agreements and National Sovereignty	p. 137
8.5 Enforcement of Labor and Environmental Standards	p. 142
9 Competition Policy	p. 147
9.1 Competition Policy in GATT	p. 148
9.2 The Model with Competition Policy	p. 152
9.2.1 The General Equilibrium Model	p. 152
9.2.2 Government Preferences	p. 155
9.3 The Purpose of a Trade Agreement	p. 158
9.4 Trade Agreements and National Sovereignty	p. 160
10 Agricultural Export Subsidies	p. 163
10.1 Agricultural Export Subsidies in GATT	p. 163
10.2 Features of the Agricultural Disputes	p. 165
10.3 Theoretical Approaches	p. 167
10.4 The Model of Agricultural Export Subsidies	p. 169
10.4.1 The Partial Equilibrium Model	p. 169
10.4.2 Government Preferences	p. 171
10.5 The Purpose of Subsidy Agreements	p. 172
10.5.1 Nash Subsidies	p. 172
10.5.2 Cooperative Subsidies	p. 174
10.5.3 Efficient Subsidies	p. 174
10.5.4 Illustration	p. 176
10.5.5 Interpretation	p. 177
10.6 The Treatment of Export Subsidies	p. 179
11 The Practical Relevance of Terms-of-Trade Considerations	p. 181
12 Conclusion	p. 187
Appendixes	p. 191
A Appendix to Chapter 2	p. 191
B Appendix to Chapter 5	p. 195
B.1 The General Equilibrium Model: Further Details	p. 195
B.2 The Efficiency Frontier: Characterizations	p. 195
B.3 Many Goods	p. 200
References	p. 207
Index	p. 217

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