The Economics of Special and Differential Trade Regimes
42 Pages Posted: 10 Sep 2004
Date Written: July 2004
We examine the theoretical rationale for the simultaneous granting of temporary Special and Differential (S&D) treatment to developing countries - both in ite protection and market-access components - under the WTO agreements. S&D rules constitute the centrepiece of the WTO's strategy for integrating developing countries into the trading system, but have been criticized - both on theoretical and empirical grounds - as being ineffective. We show that seemingly non-reciprocal, limited-duration S&D treatment can be rationalized as a transitional equilibrium feature of a self-enforcing international agreement between a large developed and a small developing country, where the two sides have a joint interest in helping the developing country to overcome a policy commitment problem.
Keywords: Policy commitment, international agreements, trade and development
JEL Classification: D72, D78, F13
Suggested Citation: Suggested Citation