The Design of Trade Agreements
What does economics have to say about the design of international trade agreements? We review a literature on this question, providing detailed coverage on three key design features of the GATT/WTO: reciprocity, nondiscrimination as embodied in the MFN principle, and tariff bindings and binding "overhang." Each of these features is central to the design of the GATT/WTO, and we argue that an economic perspective can go a long way toward revealing a consistent logic to the inclusion of these design features in trade agreements.
This paper will appear as Chapter 8 of the forthcoming Handbook of Commercial Policy (Elsevier, Kyle Bagwell and Robert W. Staiger, Editors). We thank Emily Blanchard and Giovanni Maggi as our discussants and for detailed comments on an earlier draft, and participants at the Handbook of Commercial Policy Conference held at Dartmouth College June 4-June 6 2015 for helpful discussion. Bagwell thanks the Center for Advanced Studies in the Behavioral Sciences for support and hospitality. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Robert W. Staiger
In the Fall of 2011, I served as a consultant for the WTO and wrote a background paper ( http://www.ssc.wisc.edu/~rstaiger/NTMs_WTO_123111 ) for the WTO's World Trade Report 2012.