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The WTO Promotes Trade, Strongly but Unevenly

Arvind Subramanian, Shang-Jin Wei

Publication type: Journal article

Research Archive Topic: Business Economics and Public Policy, World Business

Abstract

This paper furnishes robust evidence that the WTO has had a strong positive impact on trade, amounting to about 120 percent of additional world trade (or US$ 8 trillion in 2000 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 broadly 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.

The final version of this article can be found at http://dx.doi.org/10.1016/j.jinteco.2006.07.007.


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Citation

Subramanian, Arvind, and Shang-Jin Wei. "The WTO Promotes Trade, Strongly but Unevenly." Journal of International Economics 72, no. 1 (May 2007): 151-175.


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