Reciprocal Trade Liberalization

52 Pages Posted: 13 Jul 2000  

Kyle Bagwell

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Robert W. Staiger

Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 1996

Abstract

Why have governments found reciprocal trade agreements such as GATT to be a more effective means of facilitating trade liberalization than unilateral initiatives? We provide in this paper an analytic framework for the study of reciprocal trade agreements. We use this framework to establish three main results. First, we argue that political-economy factors are important for explaining the range of trade policies observed, but that these factors cannot explain why governments seek reciprocal trade agreements as an institutional form for implementing their preferred policies. Rather, whether or not governments are politically motivated, Johnson (1953-54) was right: The central purpose of a reciprocal trade agreement is to eliminate the terms-of-trade driven policies that arise in the absence of such an agreement. Second, we establish an economic interpretation of the principles of reciprocity and nondiscrimination that represent the foundation of postwar reciprocal trade agreements. Finally, we offer new insights regarding the treatment of export subsidies in reciprocal trade agreements.

Suggested Citation

Bagwell , Kyle and Staiger, Robert W., Reciprocal Trade Liberalization (March 1996). NBER Working Paper No. w5488. Available at SSRN: https://ssrn.com/abstract=225519

Kyle Bagwell (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert W. Staiger

Stanford University ( email )

Stanford, CA 94305
United States

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-2265 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Downloads
35
Abstract Views
828