As the WTO may still have substantial tariff liberalising “work” to accomplish, identifying precisely where in fact the work is usually to be done could make for a far more fruitful group of negotiations next time around.
On average, the data from economic research (Bown 2015; Nicita et al. 2013) suggests a solid positive correlation remains between several emerging economies’ applied tariffs and their import market power.
With all this result, one proposal is to permit these emerging economies the same basic framework for reciprocal tariff cutting negotiations amongst each other – with the tariff cuts then extended fully WTO membership on an MFN basis – just as the GATT system established in 1947 and that the high-income countries successfully relied upon through the subsequent decades until the establishment of the Doha Agenda in 2001.[iv]
Finally, there are other practical reasons to bring these emerging economies’ applied tariffs in to the ambit of future WTO negotiations. Hardly any (see again Table 1) get excited about the mega-regional clubs of the Trans-Pacific Partnership (TPP) Agreement, the RCEP or FTAAP negotiations, plus they are certainly not part of the T-TIP negotiations between your US and EU. The WTO could be their own best bet at finding a forum to extract themselves from their current terms-of-trade driven prisoner’s dilemmas.
Bagwell, Kyle, Chad P. Bown and Robert W. Staiger (forthcoming) “May be the WTO Passé?” Journal of Economic Literature.
Bagwell, Kyle and Robert W. Staiger (1999) “An Economic Theory of GATT,” American Economic Review 89(1): 215-48.
Bagwell, Kyle and Robert W. Staiger (2002) The Economics of the World Trading System. Cambridge, MA: The MIT Press.
Bagwell, Kyle and Robert W. Staiger (2011) “What do trade negotiators negotiate about? Empirical evidence from the World Trade Organisation,” American Economic Review 101(4): 1238-73.
Bagwell, Kyle, Robert W. Staiger, and Ali Yurukoglu (2015) “Multilateral Trade Bargaining: AN INITIAL Consider the GATT Bargaining Records,” NBER Working Paper No. 21488, August.
Beshkar, Mostafa, Eric W. Bond, and Youngwoo Rho (2015) “Tariff binding and overhang: theory and evidence,” Journal of International Economics 97(1): 1-13.
Bown, Chad P. (2015) “What’s Left for the WTO?” CEPR Discussion Paper No. 11003, December.
Bown, Chad P. and Meredith A. Crowley (2013) “Self-Enforcing Trade Agreements: Evidence from Time-Varying Trade Policy,” American Economic Review 103(2): 1071-1090.
Broda, Christian, Nuno Limão, and David E. Weinstein (2008) “Optimal tariffs and market power: the data,” American Economic Review 98(5): 2032-65.
Handley, Kyle (2014) “Exporting under trade policy uncertainty: Theory and evidence,” Journal of International Economics 94(1): 50-66.
Handley, Kyle and Nuno Limão (2014) “Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the united states,” Mimeogr., University of Maryland
Handley, Kyle and Nuno Limão (2015) “Trade and Investment under Policy Uncertainty: Theory and Firm Evidence,” American Economic Journal: Economic Policy 7(4): 189-222.
Johnson, Harry G. (1953-54) “Optimum Tariffs and Retaliation,” Overview of Economic Studies 21(2): 142-153.
Ludema, Rodney D. and Anna Maria Mayda (2013) “Do Terms-of Trade Effects Matter for Trade Agreements? Theory and Evidence from WTO Countries,” Quarterly Journal of Economics 128(4): 1837-93.
Nicita, Alessandro, Marcelo Olarreaga, and Peri Silva (2013) “Cooperation in WTO’s Tariff Waters,” CEPR Discussion Paper No. 9529.
[i] Furthermore to their study of GATT/WTO non-members, Broda, Limao and Weinstein (2008) also examine the MFN tariffs for america and discover no statistically significant evidence for his or her measures of foreign export supply elasticities. Also see Nicita, Olarreaga and Silva (2013), Bown and Crowley (2013), and Beshkar, Bond and Rho (2015). Bagwell, Bown, and Staiger (forthcoming) give a recent survey of the idea and empirical evidence on the WTO.
[ii] Reducing tariff bindings and eliminating tariff binding overhang may have other benefits, however, such as for example reducing trade policy uncertainty (Handley 2014, Handley and Limão 2014, 2015). Nevertheless, this won’t address the negative terms-of-trade externality.
[iii] See specifically the regression estimates in Bown (2015), Table 8, column (7).
[iv] For a micro-level empirical analysis of the negotiations occurring beneath the Torquay Round of GATT negotiations in 1950-51, see Bagwell, Staiger and Yurukoglu (2015).