Modelling the Extensive Margin of World Trade: New Evidence on GATT and WTO Membership

Felbermayr, Gabriel; Köhler, Wilhelm

doi:10.1002/9781444343991.ch4

Cited by 1 publication

(2 citation statements)

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“…While the purpose of the program is clear, the economic and political aspects are debated. And empirically, despite the expectation that GSP should always be positively signed for exports, many studies report a negative relationship (Özden and Reinhardt, 2005;Tomz et al, 2007b;Felbermayr and Kohler, 2009;Chang and Lee, 2011;Herz and Wagner, 2011;Buono and Lalanne, 2012). Lower exports under GSP are likely due to a lack of universality in product coverage, as well as the fact that there are 'competitive limitations' placed on poor-country exports under the program, meaning that exports can be suspended if they surpass specified year-on-year growth rates.…”

Section: Argumentmentioning

confidence: 99%

“…What explains this negative marginal effect? To begin, recall that the economic effects of GSP on exports are widely debated, and many studies have found that GSP, itself, is negatively signed (Özden and Reinhardt, 2005;Tomz et al, 2007;Felbermayr and Kohler, 2009;Chang and Lee, 2011;Herz and Wagner, 2011;Zappile, 2011;Buono and Lalanne, 2012). There are three reasons for this.…”

Section: Modelsmentioning

confidence: 99%

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The Disadvantage of Membership: How Joining the GATT/WTO Undermines GSP

Tobin

Busch

2018

World Trade Review

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Scholars and policymakers have long debated whether the Generalized System of Preferences (GSP) enhances development through increased trade – i.e., whether the program is effective as a form of ‘trade-as-aid’. We argue that, by itself, GSP increases poor-country exports, but that when recipients join the General Agreement on Tariffs and Trade (GATT) or its successor, the World Trade Organization (WTO), they realizefewerimports, and less gains in total trade, than GSP recipients that do not join the multilateral trading system. The logic is that GATT/WTO membership makes GSP more predictable by making it non-discriminatory, in the sense that exporters in recipient countries are less vulnerable to the program's ad hoc conditionality. This leads these exporters to lobby less against domestic protectionism, yielding higher trade barriers at home, and thus fewer imports. We test this hypothesis using a gravity model of trade, and data on all GSP programs, and find strong support for the argument that the GATT/WTO's interaction with GSP undermines trade.

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