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Submitted to:
Mrs. Monika Jain
EMPIRICAL RESULTS
1 Basic Results 2 Asymmetry between sector 3 New versus Old Developing Country Members 4 Industrial country effect or WTO effect?
CONCLUDING REMARKS
Rose (2004a) has seriously called into question the effectiveness and hence the usefulness of the GATT/WTO as a multilateral institution. His analysis implies that the GATT/WTO, whose raison dtre is to promote trade, has failed to do so. Our paper shows, however, that the GATT/WTO has done a splendid job of promoting trade. The GATT/WTO has served to increase world imports substantially, possibly by about 120 percent of world trade (about US$8 trillion in 2000 alone). But this trade promoting role of the GATT/WTO has been uneven. This unevenness is related to four asymmetries in the system, most of which can be rationalized by the recent economic theory of the GATT/WTO. Our empirical investigation has found evidence consistent with these asymmetries.
It is useful to note that the empirical results do not imply that developing countries have not benefited from WTO membership. A distinction needs to be made between developing country WTO members as exporters and importers. Our results suggest that there has been little impact of WTO membership on developing countries imports. But the positive impact of WTO membership on industrial country imports meant that developing countries exports also increased significantly. Developing country exports to industrial countries, on our estimates, were at least one and a half times greater because of the GATT/WTO. In other words, despite not liberalizing themselves sufficiently, they enjoyed the benefits of industrial country liberalization, notwithstanding the exclusion of agriculture, clothing, and a few other sectors from GATT liberalization. While clearly beneficial for them, these unreciprocated benefits pose a challenge to the theory of the GATT/WTO, which merits further research.
Bibliography:
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