Economic Theory and the Interpretation of GATT/WTO
Author(s)
Bagwell, Kyle; Staiger, Robert W.
Abstract
Given the significant influence of GATT/WTO on the world economy, it is of special importance to assess the progress that economists have made in providing a theoretical interpretation of GATT/WTO. This is the focus of the present paper. Our discussion proceeds in three broad steps. First, we consider the theory of trade agreements. We organize our discussion here around a simple but fundamental question: What is the problem that a trade agreement might solve? Second, we briefly describe the history and institutional design of GATT/WTO. Finally, we draw on the recent theoretical literature and interpret the design of GATT/WTO. Our discussion examines two key features of GATT/WTO: reciprocity and enforcement.
