# **3 WTO Non-Members (and recently acceded members)**

This section focuses attention on the current WTO non-member countries in the international trading system. One ultimate question of interest - to which I will admittedly only be able to provide very indirect evidence - is whether such countries apply import tariffs that reflect market power motives and whether those would be neutralized should those countries accede to the WTO. First, I introduce the current WTO non-members and their political economic characteristics. Then I examine a comparison group of countries that recently acceded to the WTO. I then investigate empirically the implications of the term-of-trade theory of trade agreements for that second group of countries by applying the Nicita, Olarreaga and Silva (2013) foreign export supply elasticities to the basic estimation approach introduced by Bagwell and Staiger (2011).

## **3.1 Introduction and political-economic characteristics**

As Figure 1 illustrates, the current non-members of the WTO are found throughout the world; nevertheless, they are disproportionately concentrated in the Middle East and North Africa, East Africa, and Central Asia. Table 2 provides summary data for key economic characteristics of these countries, as well as comparable data for a separate list of important comparison countries that recently acceded to the WTO - i.e., between 1998 and 2014.<sup>15</sup> For ease of exposition, I rank the countries in each group by Gross National Income (GNI) per capita, and I split them roughly into three categories based on GNI per capita - I refer to the three groups as low income, lower-middle income, and middle and higher income.<sup>16</sup> For countries that are not yet members of the WTO, I also provide information on whether they have formally been granted “observer” status by the WTO.<sup>17</sup> Table 2 reveals a number of stylized facts about the current WTO non-members. First, they are disproportionately poor countries - at least 28 of the 38 countries have GNI per capita in 2013 that was less than the world average of $10,683. Second, there is a wide range in the size of the populations of these countries. Some are tiny (and relatively wealthy) city-states or islands, with less than a million people. Others are poorer and larger countries in Africa - the largest is Ethiopia at 94 million people. Combined, 490 million people live in these WTO non-member countries, or 6.9 percent of the total world population.

Most of the WTO non-member countries had imports that were greater than exports in 2013. The exceptions are mostly made up of major energy (oil and/or natural gas) producers/exporters - e.g., Algeria, Azerbaijan, Equatorial Guinea, Iran, Iraq, Kazakhstan, Libya, and Turkmenistan. For

> 15I utilize data on accessions starting only in 1998 (instead of, for example, 1996) because some of the initial wave of WTO accession countries in 1996 and 1997 were countries that may have simply waited to begin the domestic legal process to formally ratify WTO membership until after the major WTO members had done so, i.e., recalling the US experience at failing to ratify the ITO in the 1940s, which led to the GATT.

> 16Note that these three country groupings do not correspond to the World Bank’s official categories.

> 17Governments with WTO observer status are not members but they are granted limited WTO rights, such as access to certain WTO meetings, but they are also expected to uphold other obligations, such as making some (minimal) contributions to the WTO’s operating budget.

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