wto membership and the shift to consumption taxes abstract this paper explores tax policy effects and revenue implications of joining the world trade organization wto and its predecessor the general agreement on tariffs and trade gatt it documents that countries joining gatt wto after 1990 have implemented tariff cum tax reforms lowering tariff rates and raising consumption tax rates in particular through reform or introduction of a value added tax vat employing a panel of 97 developing and transitional countries 31 of which joined gatt wto between 1990 and 2011 using robust difference in difference specifications as well as the synthetic control method we find a statistically and economically significant decline in revenues from import duties this finding supports concerns about revenue losses but also corroborates the efficacy of the late uruguay gatt and the wto trade regimes in promoting free trade among new members regarding consumption taxes we find robust evidence that revenue substitution was successful since revenue losses from import duties were more than compensated for by enhanced revenues from consumption taxes with regard to the timing of the revenue effects our results show that revenue losses in import duties mostly take place at the time of membership or later changes in consumption taxation however exhibit pre membership effects as revenues are increased and vat is adopted often a few years ahead of losses in import duties no such effects are found before the start of the accession negotiations indicating that consumption tax reforms are initiated once a country is on the road to gatt wto membership

the role of multilateral institutions in international trade cooperation 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

the not so generalized effects of the generalized system of preferences we use an empirical gravity equation approach to study how nonreciprocal trade preferences nrtps enacted mainly through the generalized system of preferences affect the exports of the beneficiary nations in line with existing studies the average trade effect stemming from nonreciprocal preferences is highly unstable across specifications however once we allow for heterogeneous effects results become robust and economically important specifically nrtps have a strong effect on the exports of beneficiaries when they are members of the world trade organization and are very poor not so poor beneficiaries also expand foreign sales but only if they are not wto members for all others the average export effects of nrtps are mute

backward stealing and forward manipulation in the wto abstract motivated by the structure of wto negotiations we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most favored nation mfn principle we identify backward stealing and forward manipulation problems that arise when governments bargain under the mfn principle in a sequential fashion we show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed we identify the wto nullification or impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems in this way we suggest that wto rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process

an introduction to the law and economics of intellectual property although economists have written on topics of intellectual property for a long time the impact of economics on public policy in this area has been slight especially as compared to the influence of professional writings in areas such as antitrust and taxation we believe that too few of the profession s resources have been devoted to these issues and that of those resources that have been employed too few have been devoted to empirical analyses we hope that this introductory essay and the three papers that follow will stimulate interest in this subject this introductory essay first describes some of the basic economic tradeoffs involved in intellectual property law and then describes the framework of the law in the six areas described above patent copyright semiconductor protection trademark trade secret and misappropriation it is intended both to provide thumbnail descriptions of the various intellectual property regimes to economists working in this area and to indicate where additional economic research might be useful

heterogeneous trade agreements wto membership and international trade an analysis using matching econometrics this article explores the heterogeneous effects of trade agreements tas and world trade organization wto membership on the volume of international trade we extend baier and bergstrand s 2009a application of matching econometrics by distinguishing between different types of tas and wto participation and account for the endogenous nature of trade policy for a panel data set covering 1960 2005 and 187 countries we find that the treatment effect on international trade systematically varies with the type of ta and wto membership

the value of trade agreements in the presence of political pressures an argument often heard in favor of trade agreements is that by committing to free trade a government can credibly distance itself from domestic lobbies but several existing models of endogenous protection suggest that governments have no interest in foreclosing interest group pressures since governments derive rents from the political process we develop a small country model in which factors are sector specific in the short run but mobile in the long run we show that in this setting a government may be worse off in the political equilibrium than under commitment to free trade and hence it may value a trade agreement

regional trade agreements and the pattern of trade a networks approach this paper uses a complex network approach for the analysis trade effects from regional trade agreements on world trade flows we use bilateral trade data to compute the network community structure for every year between 1970 and 2000 we compare this to null community structures that emerge from various models based on regional and geographical classifications the implementation of rta s and gravity models of trade our results show that rta formation appears to have a cyclical pattern on the world trade network community structure we document periods where bilateral trade flows and the structure of the world trade network are consistent with those predicted by formation of rtas these cycles occur in 1980 86 and 1990 96 at the same time we document periods in which the pattern in the world trade network is not explained by rta formation two periods 1986 90 and 1997 2000 show a pattern of bilateral trade flows that moves away from the prediction that results from assuming rta formation as the driving force in the determination of the world trade network structure factors contributing to the latter parts of the cycle during our sample period include formation of regional trade networks in east asia that account for a significant portion of world trade but are not formalised by rtas in force

bilateral treaties and the most favored nation clause the myth of trade liberalization in the nineteenth century textbook accounts of the anglo french trade agreement of 1860 argue that it heralded the beginning of a liberal trading order this alleged success holds much interest from a modern policy point of view for it rested on bilateral negotiations and most favored nation clauses with the help of new data on international trade the ricardo database the authors provide empirical evidence and find that the treaty and subsequent network of mfn trade agreements coincided with the end of a period of unilateral liberalization across the world they also find that it did not contribute to expanding trade at all this is contrary to a deeply rooted belief among economists economic historians and political scientists the authors draw a number of policy lessons that run counter to the conventional wisdom and raise skepticism toward the ability of bilateralism and mfn arrangements to promote trade liberalization

bilateral graduation the impact of epas on ldc trade space abstract as trade is prominently mainstreamed into development policies the ongoing economic partnership agreement epa negotiations between the eu and the african carribbean and pacific acp countries are a turning point in least developed countries ldc engagement with the international trading system the process covers most un designated ldcs and is the first time they feature in the first row of international trade talks we explore how the space ldcs occupy in the trade regime will be affected by epas the analysis suggests that they move ldcs towards effective graduation from special and differential treatment while innovating on policy tools to address underdevelopment

interacting factor endowments and trade costs a multi country multi good approach to trade theory abstract we provide a synthetic analysis of the different ways in which countries participate in the world economy classic trade questions are reconsidered by generalizing a factor proportions model to multiple countries multiple goods or multi stage production and country specific trade costs each country s production specialization trade and welfare is determined by the interaction between its relative endowment and its trade costs we consider the effects of allowing one good to fragment into component and assembly production the volume of trade and welfare levels are higher with fragmentation for most countries although for many countries these variables fall with fragmentation

the gatt in historical perspective the transformation of the general agreement on tariffs and trade gatt into the world trade organization wto on january 1 1995 provides an opportune moment to take stock of the gatt s achievements and shortcomings alongside those of its 50 year old sister international institutions set up at bretton woods it is temptingly easy to attribute the astounding postwar economic expansion particularly when set against the turbulent interwar period when multilateral efforts to contain protectionist pressures failed miserably to the economic policies embodied in the gatt and to the initial stability provided by the bretton woods institutions yet a closer look at precisely what the gatt accomplished in its first decade suggests that trade liberalization under its auspices alone is far from sufficient to explain the postwar economic boom

the politics of foreign direct investment into developing countries increasing fdi through international trade agreements the flow of foreign direct investment into developing countries varies greatly across countries and over time the political factors that affect these flows are not well understood focusing on the relationship between trade and investment we argue that international trade agreements gatt wto and preferential trade agreements ptas provide mechanisms for making commitments to foreign investors about the treatment of their assets thus reassuring investors and increasing investment these international commitments are more credible than domestic policy choices because reneging on them is more costly statistical analyses for 122 developing countries from 1970 to 2000 support this argument developing countries that belong to the wto and participate in more ptas experience greater fdi inflows than otherwise controlling for many factors including domestic policy preferences and taking into account possible endogeneity joining international trade agreements allows developing countries to attract more fdi and thus increase economic growth

wto accession and tariff evasion abstract this study documents some unintended consequences of the world trade organization wto membership by providing evidence on displacement of tariff evasion driven by the wto accession process the analysis focuses on the wto customs valuation agreement cva which limits the discretion of customs officials when it comes to assessing the price of imports while prior to the wto accession customs officials are free to use their own judgment or apply minimum or reference prices after their country joined the wto they are mandated to accept the invoice price issued by the exporter if customs officials enjoy discretion with respect to assessing the import price they may assist importers with tariff evasion in exchange for bribes removing such discretion limits their ability to facilitate misrepresentation of import prices using data on 15 countries which joined the wto between 1996 and 2008 we find a positive relationship between underreporting of import prices and the tariff rate which is expected as the incentive to evade increases with the tariff rate importantly this relationship disappears after a country joins the wto this result is consistent with the cva closing one channel for corrupt behavior however we also find that changes to customs valuation procedures induce importers to seek alternative ways of tariff evasion such as underreporting of quantities and product misclassification the overall level of evasion remains unchanged

are external shocks responsible for the instability of output in low income countries external shocks such as commodity price fluctuations natural disasters and the role of the international economy are often blamed for the poor economic performance of low income countries the author quantifies the impact of these different external shocks using a panel vector autoregression var approach and compares their relative contributions to output volatility in low income countries vis a vis internal factors he finds that external shocks can only explain a small fraction of the output variance of a typical low income country internal factors are the main source of fluctuations from a quantitative perspective the output effect of external shocks is typically small in absolute terms but significant relative to the historic performance of these countries

choosing the open sea the cost to the uk of staying out of the euro abstract in this paper we provide an estimate of the trade flows that there would have been between the uk and its main trading partners if the uk had joined the euro as an alternative approach to the standard log linear gravity equation we employ the synthetic control method we show that the aggregate trade flows between britain and eurozone members would have been 16 higher if the uk had adopted the euro we also provide an estimate of the hypothetical euro s effect on trade flows between the uk and non euro countries our results suggest that the adoption of the european currency would also have led to a substantial increase in british trade flows with non euro members finally we provide a new estimate of the euro s trade impact for euro members our results suggest that the adoption of the single currency led to an increase in intra european trade flows of between 19 and 55

rethinking trade preferences how africa can diversify its exports this paper argues that the contribution of trade preferences to economic development needs to be reappraised in light of the growth of globalised trade in manufactures trade preferences may be able to act as a catalyst for manufacturing exports leading to rapid growth in exports and employment to do so preferences need to be designed to be consistent with international trade in fragmented tasks as opposed to complete products and need to be open to countries with sufficient levels of complementary inputs such as skills and infrastructure recent experience with the african growth and opportunities act shows that in the right conditions sub saharan african countries have had large manufacturing export supply response to trade preferences

do international rulings have spillover effects the view from financial markets how influential are international courts can their rulings reach beyond a given case and affect the behavior of countries not party to the dispute international law is clear on the matter rulings have no formal authority beyond the case at hand this tenet is consistent with the incentives of sovereign states wary of delegating too much authority to courts by contrast the authors claim that even in the absence of formal authority the rulings of international courts can affect behavior by mobilizing pro compliance groups in countries not party to a dispute they test these beliefs in the context of the world trade organization wto through a novel approach because wto rulings have implications for the fortunes of publicly traded firms they examine whether financial markets bet on there being spillover effects beyond the case at hand they rely on two quantitative case studies to test for a cross border and a cross industry spillover effect can rulings have effects in countries and on industries other than those at issue in the initial dispute the results suggest that the answer is a tentative yes the spillover effects of international rulings may be a matter of scholarly contention but their existence is something that financial markets appear willing to bet on

a new global database on agriculture investment and capital stock abstract this paper introduces a new analytical database on aggregate physical investment flows and capital stock in agriculture forestry and fishing for 189 countries and territories over the period 1995 2017 long time series of the agricultural investment to value added ratio are employed to obtain agricultural investment flows these latter are subsequently converted into capital stock series by applying a variant of the perpetual inventory method this article describes the database content and the data sources the methodology used to deal with missing data in the investment to value added ratio as well as several measurement issues underlying its development lastly it presents an overview of the main global and regional trends in agricultural gross fixed capital formation and capital stock drawing some implications and directions for future research

rates of return on capital across the world are they converging this article estimates levels and identifies trends in the profitability of capital in a broad sample of developed developing and post communist transition economies making up over 80 of global output the underlying distributional and efficiency determinants of profitability are considered in the marxian analytical framework for the period of 1995 2007 leading to the great recession our estimates indicate a trend towards convergence of national profit rates largely driven by the convergence of profitability in developing and transition economies during this period the level of profit rates in all groups of countries experienced growth with the global capital weighted rate of profit increasing by approximately 50 the main contributor to this growth in all groups of countries was the increase in average productivity of capital measured by output capital ratio in developed and transition economies the increase in profit shares of national income and the decline in the relative price of capital goods also contributed to profitability growth in the same period for developing countries profit shares and relative prices were relatively stable

capitalists and workers knowledge and the strategic role of investment within the firm does the ownership of capital confer a strategic advantage within the firm the formation of a firm frequently represents an attempt by an individual to secure a return on knowledge and we demonstrate that in this context there can be an incentive to precommit capital before contracting with other members of the firm that is to be the capitalist results are also obtained on the investment level and wage rate the key ingredient of the model is emergence of a product market entry threat from within the firm this contrasts with the anonymous external potential entrant prevalent in the literature

politics institutions and trade lessons of the interwar era recent studies cast doubt on the value added of international trade agreements and institutions using a new data set that consists of about 35 000 observations on the trade of fifty four nations between 1919 and 1938 we examine whether this skepticism also applies to the infamous interwar trade blocs traditional historical accounts attribute to them a large drop in international trade and a rise in the political tensions that would later erupt in world war ii in this study we show that no bloc raised trade among its members as a whole or decreased trade between members and nonmembers however our findings are not wholly consistent with the skepticism recent studies express we argue that conflicts of interest among the great powers encouraged the emergence of the bloc system and also gave rise to intrabloc trade shifts consistent with the political interests of their great power hubs the political military alliances these conflicts created also reduced trade between their signatories and we argue more generally that the causal chain runs from politics to trade as a result measuring only the effect of agreements and institutions on aggregate trade between their members can generate inaccurate estimates of their value added

the wto trade effect this paper reexamines the gatt wto membership efiect on bilateral trade ows using nonparametric methods including pair matching permutation tests and a rosenbaum 2002 sensitivity analysis together these methods provide an estimation framework that is robust to misspeciflcation biases allows general forms of heterogeneous treatment efiects and addresses potential hidden selection biases this is in contrast to most conventional parametric studies on this issue our results suggest large gatt wto trade promoting efiects robust to various restricted matching criteria alternative indicators for gatt wto involvement different matching methodologies non random incidence of positive trade ows and inclusion of multilateral resistance terms

economic partnership agreements between sub saharan africa and the eu a development perspective this paper draws on hinkle and schiff 2003 it analyses the planned economic partnership agreements epas between the eu and sub saharan africa ssa from a development perspective it does not take a position on whether ssa should enter into epas with the eu rather it starts from the notion that the process of forming epas is unlikely to be reversed and examines the conditions that will maximise ssa s benefits from the epas if this notion is correct then the analysis presented in the paper applies on the other hand pascal lamy the eu trade commissioner made a proposal at the may 2004 g 90 summit in dakar that might lead to a change in the epa process he proposed that the g 90 a group consisting of acp and non acp ldc countries should not have to make concessions at the wto doha round of multilateral trade negotiations i e he proposed a free round for the g 90 this proposal opens the door to the possibility that the same might apply to the acp countries in the eu acp negotiations and that the epa process might be reversed the paper considers the key issues raised by the planned epas their relationship to the wto s doha round and the eu s everything but arms initiative the changes needed to make the epas internally consistent the domestic reforms in ssa that would need to accompany trade liberalisation in both goods and services and the potential effects of the epas on regional integration in ssa the epas will pose a number of policy challenges for ssa countries including restructuring of indirect tax systems reduction of mfn tariffs liberalisation of service imports on an mfn basis and related regulatory reforms in the services sector and liberalisation of trade in both goods and services within the regional trading blocs in ssa the paper also finds that the epas provide an opportunity to accelerate regional and global trade integration in ssa to realise the potential development benefits of the planned epas two steps are essential first the eu must as it has stated truly treat the epas as instruments of development subordinating its commercial interests in the agreements to the development needs of ssa second the ssa countries need to implement a number of epa related trade policy reforms however the latter is far from certain given the lack of reform momentum in ssa

non cooperative bargaining theory an introduction the paper provides an informal introduction to some of the main themes of the recent literature on non cooperative or sequential bargaining models it focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by nash bargaining theory it illustrates the new insights offered by the non cooperative approach by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome finally the difficulties which arise in extending this analysis to two person bargaining with incomplete information and to n person bargaining are discussed this is a revised version of the fourth review of economic studies lecture presented in april 1985 at the joint meeting of the association of university teachers of economics and the royal economic society held in oxford the choice of lecturer is made by a panel whose members are currently professors hahn mirrlees and nobay and the paper is refereed in the usual way this paper aims to provide an informal and elementary introduction to an approach to bargaining which has received a great deal of attention over the past few years the approach involves writing down some particular sequence of moves offers and replies to be made over time in the course of negotiations and then looking for a non cooperative equilibrium in the game thus specified in practice a perfect equilibrium or in games of incomplete information a sequential equilibrium while the approach appears at first sight to be very different in spirit from the traditional axiomatic approach in which a bargaining solution is specified by appealing to a number of general requirements which are deemed appropriate on the basis of some a priori considerations the two approaches are in fact complementary while the

is the wto mystery really solved the wto s impact on bilateral trade remains puzzling due in part to previous studies failure to simultaneously address three issues inclusion of zero trade proper controls for multilateral resistance and proper membership definition addressing all fails to suggest a positive effect

multilateral environmental agreements and the wto addressing many environmental problems requires international cooperation however rules under the world trade organization wto may deter participation in multilateral environmental agreements using a partial identification approach we obtain strictly negative bounds for non oecd countries in the wto era

agoa and apparel who captures the tariff rent in the presence of preferential market access he african growth and opportunity act agoa was signed by presidentclinton in may 2000 and quickly became one of the most high pro lespecial and differential treatment sdt programmes implemented agoaintends to encourage higher levels of trade and direct investment in support ofpositive economic and political developments throughout sub saharan africa us congress 2000 thirty six countries were designated to be eligible for theagoa preferences for 2003 the main feature of agoa like other sdt programmes such as the unitedstates version of the generalised system of preferences gsp is the duty freeaccess granted to certain products however agoa goes beyond the standardgsp provisions and includes a wide range of textiles and apparel in the list ofproducts to receive preferential market access the trade data indicate that asmall group of apparel exporters have been the main bene ciaries of agoapreferences so far and there has not been signi cant change in the exports of anyother product from the eligible countries in this paper we analyse the impact of agoa s preferences on prices re ceived by apparel exporters in a perfectly competitive market with homogeneousgoods exporters who enjoy duty free access should bene t from a price increase

co2 emissions and economic activity short and long run economic determinants of scale energy intensity and carbon intensity we analyze the short term and the long term determinants of energy intensity carbon intensity and scale effects for eight developed economies and two emerging economies from 1973 to 2007 our results show that there is a difference between the short term and the long term results and that climate policy are more likely to affect emission over the long term than over the short term climate policies should therefore be aimed at a time horizon of at least 8 years and year on year changes in emissions contains little information about the trend path of emissions in the long run capital accumulation is the main driver of emissions productivity growth reduces the energy intensity while the real oil price reduces both the energy intensity and the carbon intensity the real oil price effect suggests that a global carbon tax is an important policy tool to reduce emissions but our results also suggest that a carbon tax is likely to be insufficient decouple emission from economic growth such a decoupling is likely to require a structural transformation of the economy the key policy challenge is thus to build new economic structures where investments in green technologies are more profitable

do we really know that the wto increases trade comment in a recent article in the american economic review andrew k rose 2004 finds that countries belonging to the general agreement on tariffs and trade gatt and its successor the world trade organization wto did not trade more than countries that abstained from membership a vast literature on the gatt and the wto presupposes that these organizations were important but until rose there were few systematic efforts to test the assumption that membership increased trade rose s contribution is striking because he assembles a large dataset performs a myriad of analyses and uncovers scant evidence that the gatt and the wto had any impact rose describes his negative findings as an interesting mystery 112 the solution to this mystery lies in understanding who actually participated in the gatt we show that rose has overlooked a large proportion of countries to which the agreement applied and mistakenly classified them as nonparticipants when in fact they had rights and obligations under the agreement this causes a downward bias in his estimates of the gatt s effect on trade because his gravity regressions

oil curse economic growth and trade openness an important economic paradox in the economic literature is that countries with abundant natural resources are poor in terms of real gross domestic product per capita this paradox known as the resource curse is contrary to the conventional intuition that natural resources help to improve economic growth and prosperity using panel data for 95 countries this study revisits the resource curse paradox in terms of oil resources abundance for the period 1980 2017 in addition the study examines the role of trade openness in influencing the relationship between oil abundance and economic growth the study finds trade openness is a possible avenue to reduce the resource curse in our sample trade openness reduces oil curse by around 25 trade openness allows countries to obtain competitive prices for their resources in the international market and access advanced technologies to extract resources more efficiently therefore natural resource rich economies can reduce the resource curse by increasing exposure to international trade

economic development as self discovery in the presence of uncertainty about what a country can be good at producing there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated we develop a general equilibrium framework for a small open economy to clarify the analytical and normative issues we highlight two failures of the laissez faire outcome there is too little investment and entrepreneurship ex ante and too much production diversification ex post optimal policy consists of counteracting these distortions to encourage investments in the modern sector ex ante but to rationalize production ex post we provide some informal evidence on the building blocks of our model

institutions in international relations understanding the effects of the gatt and the wto on world trade the general agreement on tariffs and trade gatt and the world trade organization wto have been touted as premier examples of international institutions but few studies have offered empirical proof this article comprehensively evaluates the effects of the gatt wto and other trade agreements since world war ii our analysis is organized around two factors institutional standing and institutional embeddedness we show that many countries had rights and obligations or institutional standing in the gatt wto even though they were not formal members of the agreement we also expand the analysis to include a range of other commercial agreements that were embedded with the gatt wto using data on dyadic trade since 1946 we demonstrate that the gatt wto substantially increased trade for countries with institutional standing and that other embedded agreements had similarly positive effects moreover our evidence suggests that international trade agreements have complemented rather than undercut each other an earlier version of this article was presented at the 99th annual meeting of the american political science association philadelphia august 28 31 2003 we thank tim buthe joanne gowa miles kahler andrew rose arthur stein richard steinberg and seminar participants at stanford university the university of chicago pipes the university of california los angeles the university of california san diego and the university of virginia for many helpful comments we especially thank claire adida ashley conner moonhawk kim erin krampetz james morrison mike nardis natan sachs rachel rubinfeld and jessica weeks for excellent research assistance we are grateful for financial support from the national science foundation career grant ses 0548285 to tomz the stanford center for international development and the vice provost for undergraduate education at stanford

agglomeration and economic development import substitution vs trade liberalisation this paper analyses a model of economic development in which international differences in industrial structure and income are caused by the agglomeration of industry in a subset of countries economic development may not be a gradual process of convergence by all countries but instead involve countries moving sequentially from the group of poor countries to the group of rich countries the role of trade policy in promoting industrialisation is studied while both import substitution and unilateral trade liberalisation may be successful in attracting industry they attract different sectors and welfare levels are higher under trade liberalisation

the trade and fiscal impact of eu acp economic partnership agreements on west african countries abstract the european union is currently negotiating free trade agreements called economic partnership agreements epas with african countries as part of the cotonou agreement between the european union and african caribbean and pacific countries the paper empirically assesses the impact of the epas on trade flows and government revenue for 14 west african countries the results indicate that the decline in import duties due to the preferential tariff elimination might be of some cause for concern and that complementary fiscal and economic policies have to be implemented before or at the time the epas come into force

do trade agreements stimulate international trade differently evidence from 296 trade agreements in a seminal article rose 2004 found that the assumed positive impact of the wto on international trade was questionable this finding has been scrutinised and modified in subsequent research using different data sets econometric methods and separating the wto from other forms of trade agreements a key characteristic of the subsequent literature is the rather simplistic way in which trade agreements are treated whereby all trade agreements are lumped together trade agreements come however in many different forms and shapes this study addresses these differences in trade agreements using a unique database of 296 trade agreements we distinguish 17 trade related policy domains and indicate whether the agreements contain legally enforceable commitments this extensive and novel taxonomy of trade agreements enables us to allow for the possible heterogeneity of the impact of trade agreements on international trade using a gravity model we find that trade agreement heterogeneity indeed matters for international trade and that countries experience significant trade increases due to comprehensive trade agreements even if not all participants are in the wto

a unified method for dynamic and cross sectional heterogeneity introducing hidden markov panel models conventional statistical methods for panel data are based on the assumption that unobserved heterogeneity is time constant despite the central importance of this assumption for panel data methods few studies have developed statistical methods for testing this assumption and modeling time varying unobserved heterogeneity in this article i introduce a formal test to check the assumption of time constant unobserved heterogeneity using bayesian model comparison then i present two panel data methods that account for time varying unobserved heterogeneity in the context of the random effects model and the fixed effects model respectively i illustrate the utility of the introduced methods using both simulated data and examples drawn from two important debates in the political economy literature 1 the identification of shifting relationships between income inequality and economic development in capitalist countries and 2 the effects of the gatt wto on bilateral trade volumes

do we really know that the wto increases trade reply michael tomz judith l goldstein and doug las rivers 1hereafter tgr2 argue that the general agreement on tariffs and trade gatt and its successor the world trade organization 1wto had a substantial positive effect on trade their paper is a critique of my article do we really know that the wto increases trade which appeared in this review 2004a among other things i used a bilateral gravity model of trade and showed that dummy variables for member ship by either one or two countries in the gatt had only small effects on trade in essence tgr point out that a lot of countries were not formal members of the gatt but still participated in it as colonies or de facto or provisional members tgr argue that if one includes these other types of more informal participation one gets large positive effects for what it s worth i stated in my original article that de jure accession to the gatt need not be the same as de facto accession but i wasn t able to quantify it and encouraged others to do so tgr did precisely that at the cost of much tedious archival work i applaud them for it and will certainly not question its accuracy i also like their methodological strategy which is to follow my empirical framework closely and rely mostly on simply adding informal partici pation to formal gatt membership tgr cite my work selectively but extensively it s a clean and effective way to proceed i like their paper and have learned a lot by reading it and thinking about the issues it raised all who are interested in the topic of the impact of the multilateral system on trade should take it seriously still i have concerns about the mean ing plausibility and robustness of their results do we really know that the wto increases trade reply

on the emergence of an mfn club equal treatment in an unequal world motivated by gatt we endogenize the formation of a club whose members have to abide by the mfn principle of non discrimination the underlying model is that of oligopolistic intraindustry trade while an mfn club does not alter average tariff levels across countries it increases aggregate world welfare makes non members worse off and can immiserize its high cost members these results imply that i core wto rules such as mfn are valuable even if multilateral negotiations deliver limited trade liberalization and ii the distributional effects of mfn maybe one reason why developing countries have been granted special and differential treatment at the wto jel classification f13 f10 f15

the real impact of gatt wto a generalised approach rose s result in 2004 that gatt wto has no significant impact on bilateral trade triggered off a series of empirical studies each of those studies augments rose s paper in one specific methodological aspect with the general finding that gatt wto significantly fosters members trade although the estimated impact varies between 2 per cent and 195 per cent of trade creation we combine the methodological contributions of previous studies to overcome these isolated approaches to account for possible interactions and to develop a more general view on the impact of gatt wto in particular we find that gatt wto promotes members trade by around 86 per cent

the divergent effects of joining international organizations trade gains and the rigors of wto accession governments have joined the world trade organization wto in vastly different ways some have taken mere days to join without undertaking any trade liberalization while others have taken more than a decade and been forced to undergo significant liberalization we argue that the more rigorous a state s accession to an international organization io and thus the greater policy change required to join the greater the benefits it will receive from membership in the organization in the trade context states facing greater scrutiny from the wto and thus engaging in greater trade liberalization as part of the wto accession process should experience greater trade on joining compared to those who face little scrutiny and engage in little if any liberalization we develop a three part classification of wto members based on type of accession early automatic and rigorous and then compile detailed original data on the accession experiences of each relevant state including length of time number of veto players rounds of questions and tariff and nontariff commitments results of exhaustive quantitative tests on all countries from 1950 to 2006 which are robust to estimator sample period and model specification choices consistently demonstrate that those who engage in the greatest amount of accession driven liberalization experience the greatest trade increases from wto membership particularly in the years right after joining in contrast those who do little or nothing to join do not see any trade gains from being a wto member these findings reconcile previous findings on the effects of wto membership on trade highlight the causal importance of io accession and illuminate the conditions under which ios will have beneficial effects for member states

the africa growth and opportunity act and its rules of origin generosity undermined the african growth and opportunity act agoa signed into american law on may 18 2000 is a major plank of u s initiatives toward the african continent the act aims broadly at improving economic policymaking in africa enabling countries to embrace globalization and securing durable political and economic stability as an incentive for africa to adopt the necessary policy reform agoa offers increased preferential access for african exports to the united states this paper describes the provisions of agoa and assesses its quantitative impact on african exports particularly in the apparel sector its main conclusions are 1 agoa will provide real opportunities to africa even on conservative estimates about africa s supply response africa s non oil exports could be increased by about 8 11 percent 2 however the medium term gains could have been much greater if agoa had not imposed certain conditions and not excluded certain items from its coverage the most important condition is the stringent rule of origin that is the requirement that exporters source certain inputs from within africa or the united states estimates suggest that the absence of these conditions would have magnified the impact nearly five fold resulting in an overall increase in non oil exports of us 0 54 billion compared with the us 100 us 140 million increase that is expected in the presence of these restrictions these restrictions particularly on apparel will come at a particularly inopportune time as africa will be exposed to competition from other developing countries when the quotas maintained on the latters exports under the multi fiber arrangement mfa are eliminated africa s apparel exports will be lower by over 30 percent with the dismantling of the mfa if on the other hand agoa had provided unrestricted access the negative impact of the dismantling could be nearly fully offset

making eu trade agreements work the role of rules of origin a key element of the eu s free trade and preferential trade agreements is the extent to which they deliver improved market access and so contribute to the eu s foreign policy objectives towards developing countries and neighbouring countries in europe including the countries of the balkans previous preferential trade schemes have been ineffective in delivering improved access to the eu market since only a small proportion of the available preferences have actually been utilised the main reason for this is probably the very restrictive rules of origin that the eu imposes coupled with the costs of proving consistency with these rules if the eu wants the everything but arms agreement and free trade agreements with countries in the balkans to generate substantial improvements in access to the eu market for products from these countries then it will have to reconsider the current rules of origin and implement less restrictive rules backed up by a careful safeguards policy

agricultural trade and the gatt wto does membership make a difference recent empirical studies have estimated the trade flow effect of membership in the world trade organization wto and its predecessor the general agreement on tariffs and trade gatt one important although largely untested conclusion from this literature is that the gatt wto works well if we ignore trade in agriculture one of the institutions seemingly apparent failures this article investigates this conclusion using a large panel of agricultural and non agricultural trade flows the results are impressive the multilateral institution has delivered significant positive effects on members agricultural trade despite its sensitive nature and the reluctance of members to undertake serious reform these findings are robust to various slices of the data and recent advances in the specification and estimation of the gravity equation to account for sample selection issues and the extensive margin of trade copyright 2012 oxford university press

a panel data test for poverty traps this article develops a threshold panel data nonlinearity test for poverty traps the new testing strategy extends the work on nonlinearity tests for panel data by considering threshold nonlinearities in the fixed effects components monte carlo simulations are conducted to evaluate the finite sample performance of these tests the tests are applied to the relationship between gross domestic product gdp per capita and capital stock per capita our application to a panel of countries for the period 1973 to 2007 uncovers the presence of two regimes determined by the level of capital stock per capita the conclusions from our test also support the existence of a poverty trap determined by a capital stock per capita level at the 11 quantile of its pooled worldwide distribution

a cross country database for sector investment and capital this article presents a new database of investment and capital in agriculture manufacturing and the overall economy it covers 62 industrial and developing countries for the years 1967 92 a common method is used in the calculations to facilitate comparisons across countries and sectors the sensitivity of the calculations to choices of parameters and estimation methods is tested collectively the data show that as economies grow capital stocks accumulate but the composition of capital changes together and individually capital stocks in agriculture and manufacturing constitute a smaller share of the total capital stock than they did 20 years ago capital labor ratios show that agriculture has become more capital intensive m most countries the composition of agricultural capital has changed as well capital from investments in orchards and livestock has declined relative to capital from fixed investments in machinery irrigation and buildings

the value of making commitments externally evidence from wto accessions abstract this paper studies the value of external commitment to policy reforms in the case of wto gatt accessions the accessions often entail reforms that go beyond narrowly defined trade liberalization and have to overcome fierce resistance in the acceding countries as reflected in protracted negotiations we study the growth and investment consequences of wto gatt accessions with attention to a possible selection bias we find that the accessions tend to raise income but only for those countries that were subject to rigorous accession procedures policy commitments associated with the accessions were helpful especially for countries with poor governance

tariff liberalisation and the growth of world trade a comparative historical analysis of the multilateral trading system the aim of this study is to assess the relationship between tariff barriers and world trade growth from a comparative and historical perspective and at the same time derive some useful indications for the evaluation of the effectiveness of the current multilateral trading system in promoting world trade the distinguishing feature of this work is the complex reconstruction of the historical series for the period 1870 2000 on the tariffs and trade of 23 countries thus constituting a good proxy of world trade for the period considered accounting for over 60 per cent the study of the relationship between tariff liberalization and trade growth was made through an empirical analysis using panel data and time series the empirical results whilst confirming the existence of a long term relationship at world level between tariff reductions and trade growth demonstrate how this substantial and significant relationship in the period prior to world war ii gradually lost importance and significance from 1950 onwards this result does not controvert the role that the gatt wto system has played in trade liberalization but would confirm the arguments of those sustaining the importance of the presence of a formalized multilateral trading system not so much in tariff liberalization but in building a virtuous process of international coordination of trade policies and to ensure a fairer and fuller participation in world trade

divisionalization and entry deterrence this paper assumes that incumbent firms can create new independent divisions more cheaply than potential entrants who must incur the additional overhead costs of new entry the main theoretical result is that such divisionalization ability leads perfectly informed incumbents to preempt all rational entry into their industries in contrast existing models of entry deterrence imply that informed incumbents even those with steadily decreasing average costs will often allow rational entry our result may explain why successful large scale entry by firms with no informational advantage is extremely rare the use of divisions to preempt entry may also explain why large firms in high profit oligopolies often divisionalize allowing their divisions to compete freely despite the negative pecuniary externality that each division imposes on others

the long run decline in the share of agricultural and food products in international trade a gravity equation approach to its causes the objective of this study is to determine the causes of the loss of share of agricultural products and food in international trade the article compares using a gravity model the impact of various factors upon bilateral trade in agricultural products in manufactures and in total trade between 1963 and 2000 for a representative sample of 40 countries the results clearly demonstrate how the low demand elasticity for agricultural products and food the high degree of protectionism to which they were subjected and their meagre share in intra industrial trade are the principal causes of their relatively slow growth