NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Quantitative Analysis of Multi-Party Tariff Negotiations

Kyle Bagwell, Robert W. Staiger, Ali Yurukoglu

NBER Working Paper No. 24273
Issued in February 2018
NBER Program(s):Industrial Organization, International Trade and Investment

This paper develops a model of international tariff negotiations to study the design of the institutional rules of the GATT/WTO. We embed a multi-sector model of trade between multiple countries into a model of inter-connected bilateral negotiations over tariffs. Using 1990 trade flows and tariff outcomes from the Uruguay Round of GATT/WTO negotiations, we estimate country-sector productivity levels, sector-level productivity dispersion, iceberg trade costs, and country-pair bargaining parameters. We use the estimated model to simulate an alternative institutional setting for multilateral tariff negotiations in which the most-favored-nation requirement is abandoned. We find that abandonment of the most-favored-nation requirement would result in inefficient over-liberalization of tariffs and a deterioration in world-wide welfare relative to the negotiated outcomes in the presence of the most-favored-nation requirement.

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Document Object Identifier (DOI): 10.3386/w24273

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