TY  - JOUR
AU  - Bagwell,Kyle
AU  - Staiger,Robert W.
TI  - An Economic Theory of GATT
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6049
PY  - 1997
Y2  - May 1997
UR  - http://www.nber.org/papers/w6049
L1  - http://www.nber.org/papers/w6049.pdf
N1  - Author contact info:
Kyle Bagwell
Department of Economics
Stanford University
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-3251
E-Mail: kbagwell@stanford.edu

Robert W. Staiger
Department of Economics
The University of Wisconsin
1180 Observatory Drive
Madison, WI  53705
Tel: 608/262-2265
Fax: 608/263-3876
E-Mail: rstaiger@wisc.edu
AB  - Despite the important roel played by GATT in the world economy, economist have nto developed a unified theoretical framework that interprets and evaluates the principles that form the foundation of GATT.  Our purpose here is to propose such a framework.  Working within a general equilibrium trade model, we represent government preferences with a very general formulation that includes all the major political-economy models of trade policy as special cases. Using this general framework we establish three key results. First, GATT's principle of reciprocity can by viewed as a mechanism for implementing efficient trade agreements.  Second, through the principle of reciprocity countries can implement efficient trade agreements if and only if they also abide by the principle of nondiscrimination.  And third, preferential agreements undermine GATT's ability to deliver efficient multilateral outcomes through the principle of reciprocity, unless these agreements take the form of customs unions among partners that are sufficiently similar.
ER  -