Discussion Paper Details

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Title: The WTO Promotes Trade, Strongly But Unevenly

Author(s): Arvind Subramanian and Shang-Jin Wei

Publication Date: July 2005

Keyword(s): GATT and special and differential treatment

Programme Area(s): Institutions and Economic Performance and International Trade and Regional Economics

Abstract: This paper furnishes robust evidence that the WTO has had a powerful and positive impact on trade, amounting to about 120% of additional world trade (or US$8 trillion in 2003 alone). The impact has, however, been uneven. This, in many ways, is consistent with theoretical models of the GATT/WTO. The theory suggests that the impact of a country?s membership in the GATT/WTO depends on what the country does with its membership, with whom it negotiates, and which products the negotiation covers. Using a properly specified gravity model, we find evidence consistent with these predictions. First, industrial countries that participated more actively than developing countries in reciprocal trade negotiations witnessed a large increase in trade. Second, bilateral trade was greater when both partners undertook liberalization than when only one partner did. Third, sectors that did not witness liberalization did not see an increase in trade.

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Bibliographic Reference

Subramanian, A and Wei, S. 2005. 'The WTO Promotes Trade, Strongly But Unevenly'. London, Centre for Economic Policy Research.