that acceded to the WTO between 1995 and 2005, five of which (including China) overlapped with the Broda, Lim ̃ao and Weinstein sample of non-GATT countries. Unlike countries that had long been members of the GATT/WTO but whose tariff levels may have gradually been brought to more globally efficient levels over time, the Bagwell-Staiger framework investigates whether these new members brought their tariffs down from unbound (Nash-like) levels to bound (politically optimal and efficient) levels in one shot upon accession and in accordance with the terms-of-trade theory’s core predictions.<sup>7</sup> The Bagwell-Staiger evidence is broadly consistent with the theory; i.e., there is a strong positive relationship between the magnitude of tariff cuts negotiated under the WTO and the pre-negotiation volume of imports. Furthermore, for the five countries with which they have overlap with the Broda-Lim ̃ao-Weinstein sample, their evidence also holds when specifically controlling for the import market power as measured by Broda-Lim ̃ao-Weinstein estimated trade elasticities.

While these first two papers present evidence that is consistent with the terms-of-trade theory, the bulk of that evidence admittedly derives from countries either outside of the GATT/WTO (Broda, Lim ̃ao and Weinstein) or that only recently acceded to the WTO (Bagwell and Staiger). What about the trade policymaking behavior of the major economies that are both “inside” the GATT/WTO system and are the ones that have driven the GATT/WTO through sixty years of reciprocal tariff cutting under multilateral negotiating rounds? Furthermore, with the exception of the Broda-Lim ̃ao-Weinstein evidence for the United States, and the Bagwell-Staiger evidence for China, most of the countries in these samples were not major trading economies in the international system. This has the potential to raise concerns about the external validity for the terms-of-trade theory of trade agreements if, for some reason, these countries did not exhibit behavior consistent with that of the major players.

Ludema and Mayda (2013) provide one approach to address these concerns by examining the applied MFN tariffs under the WTO at the conclusion of the GATT’s Uruguay Round of negotiations for a larger sample of 26 countries, including most of the major economies.<sup>8</sup> In particular, they explore whether variation in these countries’ applied MFN tariffs is related to variation in these countries’ import market power and their trading partners’ (exporters’) industrial concentration. They find that the concentration of trading partner exporter interests at the product level, as measured by the Herfindahl-Hirschman Index (HHI), helps explain applied MFN tariff variation - i.e., products with a combined situation of (i) foreign export suppliers that are less concentrated and (ii) an importer with more market power tend to have higher tariffs even after GATT/WTO negotiations.

The Ludema-Mayda evidence is that there is variation in the extent to which the terms-of-trade component of a country’s tariff may be negotiated away under the WTO and that can be linked to the free rider problem arising from the GATT/WTO’s MFN rule. First, this empirical result

> 7To clarify, Bagwell and Staiger (2011) compare a country’s unbound (applied MFN) tariff rates before the country’s WTO accession with its legally binding tariff commitment post-WTO accession, and not its post-accession applied MFN rate.

> 8See also Ludema and Mayda (2009) for an alternative approach focused exclusively on the United States.

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