Do We Really Know that the WTO Increases Trade?

Abstract

This working paper was written by Andrew K. Rose (University of California, Berkeley, NBER and CEPR).

This paper estimates the effect on international trade of multilateral trade agreements: the World Trade Organization (WTO), its predecessor the Generalized Agreement on Tariffs and Trade (GATT), and the Generalized System of Preferences (GSP) extended from rich countries to developing countries. I use a standard gravity model of bilateral merchandise trade and a large panel data set covering over 50 years and 175 countries. An extensive search reveals little evidence that countries joining or belonging to the GATT/WTO have different trade patterns than outsiders. The GSP does seem to have a strong effect, and is associated with an approximate doubling of trade.

Keywords: empirical, bilateral, panel, gravity, GATT, GSP, international, multilateral, panel

JEL Classification: F13, F15