The WTO Promotes Trade, Strongly But Unevenly

42 Pages Posted: 10 Aug 2005

See all articles by Arvind Subramanian

Arvind Subramanian

International Monetary Fund (IMF); Center for Global Development

Shang-Jin Wei

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2005

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.

Keywords: Special and differential treatment, GATT

JEL Classification: F10

Suggested Citation

Subramanian, Arvind and Wei, Shang-Jin, The WTO Promotes Trade, Strongly But Unevenly (July 2005). CEPR Discussion Paper No. 5122, Available at SSRN: https://ssrn.com/abstract=781368

Arvind Subramanian

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Center for Global Development

2055 L St. NW
5th floor
Washington, DC 20036
United States

Shang-Jin Wei (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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