by WTO tariff binding legal commitments. First, they develop a theoretical model that allows for the political influence of not only import-competing sectors but also exporting sectors. In an environment in which export policies are constrained - as under the WTO, where export subsidies are illegal - they provide a theory that predicts an exporting country government will negotiate larger tariff reductions exactly where that importing country has the most market power. Their model predicts that in the instances in which applied tariffs are at their WTO binding rates, and countries are cooperating under the WTO, there will actually be a _negative_ relationship between the importer’s market power and its negotiated tariff. The intuition is that in these instances, not only does the trade agreement get the country to cooperatively reduce its tariff (so as to neutralize the terms-of-trade externality) but in equilibrium the negotiation “overshoots” and the tariff ends up even lower so as to compensate the politically organized exporters in the trading partner. Furthermore, the theoretical prediction of the positive relationship between applied tariffs and market power also arises in their model, but it only arise for applied tariffs that are well below tariff binding rates - i.e., applied tariffs in the presence of sufficiently large amounts of tariff binding “overhang.” The second major contribution of Nicita, Olarreaga and Silva (2013) is empirical. First, they construct estimates of “foreign” export supply elasticities for 101 WTO member economies at the 6-digit Harmonized System (HS06) level, resulting in a database of hundreds of thousands of importing country-product-specific elasticities. (I will draw heavily on these elasticities in the formal empirical analysis that I introduce below.) Second, they utilize these estimated elasticities to empirically investigate their model’s theoretical predictions for applied tariffs imposed between 2000 and 2009. They find evidence that the inverse foreign export supply elasticity has a _negative_ relationship with applied MFN tariffs when there is zero tariff overhang - i.e., when countries are “cooperating” in that applied rates are set at binding levels - and they find a _positive_ relationship between the importer’s market power and the applied tariff when tariff overhang levels are positive. I further investigate empirically below this second result; i.e., for “tariff overhang” products, are their currently un-checked terms-of-trade externalities that countries are imposing through their applied tariffs that the WTO could potentially be used as a negotiating forum to eliminate?

In related work, Behskar, Bond and Rho (2015) provide a terms-of-trade based theory exploring the question of where a country might set its tariff binding in relationship to its applied tariff under a trade agreement. Their theoretical model predicts that governments will seek to retain flexibility and thus bind their tariffs significantly above the applied rates where the importer has little market power. They conduct an empirical examination of product-level tariff data for a sample of 108 WTO member economies over the period 1995-2007; they also partially rely on the inverse foreign export supply elasticities generated by Nicita, Olarreaga, and Silva (2013) as the measure of import market power in their sensitivity analysis. First, they find that newly acceding WTO members bind a larger share of their product lines than the historical GATT members under the WTO. Second, their various measures of import market power are negatively related to the level of the bindings 9