joining the club: accession to the gatt/wto · joining the club: accession to the gatt/wto...

Joining the Club:Accession to the GATT/WTO

Christina DavisMeredith Wilf

Department of PoliticsPrinceton University

November 12, 2011

Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 1 / 22

Introduction

Trade Regime Membership

GATT/WTO Membership Growth

year

GAT

T/W

TO M

embe

rs a

s P

erce

nt o

f All

Cou

ntrie

s

1948 20101955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

0.0

0.2

0.4

0.6

0.8

1.0

GATT WTO


Introduction

Puzzles of Trade Regime Membership

Ad hoc conditions for membershipSome countries apply early, others delay

To understand the effectiveness of the regime we must first understandselection into the institution...

What leads a country to join the GATT/WTO?


Introduction

Overview

Research Questions:What explains timing of application to join GATT/WTO?What explains length of accession negotiation?

Findings:Geopolitical alignment brings quick application and negotiationWeak evidence that trade openness influences either stage

Contribution:Geopolitical underpinning for cooperation in trade policyFlexible conditionality can be effective


Theories of Membership

Literature on Cooperation

Theories of institutional establishment and designFunctional: establish and join to achieve mutual gains (Keohane1984)Institutional design: design accommodates problem structure(Koremenos et al 2001)

Critique that self-selection means institution has little impactEndogenous (Mearsheimer 1994/5), screening (Von Stein 2005)Broad membership or deep commitments (Downs et al 1996)

Theories of membership expansionSequential liberalization: start small, expand conditional onaligned preferences (Downs et al 1998)Differential membership obligations (Gilligan 2004)Economic logic (Copelovitch & Ohls 2011, Pelc 2011)


Argument

Argument

Institutions form like-minded groups of states across multipledimensions

Trade regime context:

Geopolitical alignment - “Western” engagementEconomic alignment - liberalize trade

Harmonization with trade regime economic objectives is allowed tooccur after application and membership rather than as a precondition


Argument

Hypotheses

1. Geopolitical alignment with GATT/WTO members increases thespeed of application and accession

Existing members have incentives to allow non-members to join nowand liberalize later

Case-by-case, moderate commitmentsAllow free-riding where it supports allies and wins friends

Like-minded members will admit politically aligned applicantsAttracts non-members reluctant to make commitments

Members deepen liberalization on consensus basis over time


Argument

Hypotheses

2. Economic alignment with GATT/WTO members increases the speedof application and accession

Compliance costs and opportunity costsTrade-dependent countries can easily comply with reciprocalliberalizationNon-members that trade with GATT/WTO members face higheropportunity costs


GATT/WTO Accession

GATT/WTO Accession Rules

Inclusive

All states/territories with control over trade policy eligible

Two accession paths of GATT (1948-1994)

Article 33 - working party negotiationsArticle 26 (former colonies) - no negotiation, immediate approval

One accession path of WT0 (1995Article 12 - working party negotiationsStandardized minimum commitments (all WTO agreementsincluding TRIMS, TRIPS, GATS, etc.)


GATT/WTO Accession

Dependent Variables

Time to Apply - non-member state intention to join regimeNegotiation Time - interplay of applicant and existing memberwillingness to agree on accession terms


Time to Apply

Country Variation in Time to Apply


Time to Apply

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−100 −50 0 50 100

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0.5

1.0

1.5

2.0

1 − 2 Yr Applicants

UN Voting Similarity to US

Ope

nnes

s

CAN

CUB

GTI

DOMJAM

TTO

BRB

NIC

GUY

PER

BRACHL

URYGBR

NLDBEL

FRA

CZL

MKD HRV

GRCSWENOR

DNK

GMB

SLEGHA

NGAUGATZA

TURIND

MMR

MYS

IDN

AUSNZL

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−100 −50 0 50 100

0.0

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1.0

1.5

2.0



Ope

nnes

s

BLZSUR

BIHCYP

MDA

EST

LVA

LTU

UKR

BLRARM

GEOAZE SEN

BEN

MRT

NER

CIV

BFA

CMR

GAB

CAF

TCD

COG

RWA MDG

MUS

TUN

KGZ

UZB

KAZ

SGP

BRN

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−100 −50 0 50 100

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1.0

1.5

2.0



Ope

nnes

s

DMA

GRD

LCAVCTKNA

COL ARG

IRL

ESP

PRT

POL

HUN

YUGYUG

ROU ISLCPV

COD

DJIAGO

MOZZMBSYC

DZAEGY

ISR

BHR

QAT

ARE

OMN

MDV

PNGVUT

SLB

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−100 −50 0 50 100

0.0

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2.0

27+ Yr Applicants


Ope

nnes

s

BHS

MEX

GTM

HND

SLV

CRI

PANVEN ECU

BOL PRY

ALB

BGR

RUS

STPGNQ

MLI GINETHCOM MAR

LBY

SDN

IRN

SYR

LBN

LBNSAU

AFGCHN

MNGNPL

THAKHM

LAO

VNM

PHL


Time to Apply

Multivariate Regression

Cox proportional hazards model with time-varying covariatesDataset of 144 nonmember countries, 1948-2008

Country-year observationsCountry enters dataset in year of independence, leaves year afterapplicationStratification by GATT Article 26 eligibilityRobust standard errors, clustered by country


Time to Apply


Dependent Variable: Time to ApplyQuantities of interest

Geopolitical alignment: level of democracy, UN voting similarity toUS, shared alliances, aid dependenceEconomic alignment: trade openness, GATT/WTO member tradedependence, PTA trade dependence, Commodity Exports

Controls: Market size (GDP), wealth (GDPpc), former colony, ColdWar, trade round, oil exporter, percent world membership inGATT/WTO


Time to Apply

Model 1 Model 2 Model 3GeopoliticalPolity score 1.095 *** 1.059 *** 1.073 ***UN voting similarity 1.014 *** 1.020 **Ally member count 1.065 *** 1.094 ***Aid dependence 1.008 **

Trade StructureOpenness 1.402 1.337 1.218GATT/WTO mbr trade % 0.994 1.012PTA trade % 1.006 1.018 *

n 2035 1562 1222countries in sample 144 119 85

country applications 132 103 71year coverage 1948-2008 1948-2008 1960-2008

exp(coef) point estimates***=1% signif; **=5% signif; *=10% signif

Geopolitical alignment consistently correlated with applicationWeak support that trade openness drives application


Time to Apply

Substantive effect, UN Voting Similarity to US

0 10 20 30 40 50

0.0

0.2

0.4

0.6

0.8

1.0

Survival Curve UN

Voting Similarity to United States

Year from Independence

Est

imat

ed P

roba

bilit

y of

Not

App

lyin

g

1st quartileUN votingsimilarity

3rd quartileUN votingsimilarity

0 10 20 30 40 50 60

−1.

0−

0.8

−0.

6−

0.4

−0.

20.

0

First Difference UN Voting Similarity to United States

Years from Independence

Est

imat

ed d

iffer

ence

, 1st

to 3

rd q

uart

ile


Negotiation Time

Negotiation Time Variation


Negotiation Time

Estimated Negotiation Timeby Degree of Openness

Negotiation Years

Est

imat

ed P

roba

bilit

y a

Cou

ntry

Has

Not

Joi

ned

High Openness

n=37

Low Openness

n=25

1 3 5 7 9 11 13 15

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0.1

0.2

0.3

0.4

0.5

0.6

0.7

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0.9

1.0

Estimated Negotiation Timeby UN Voting Similarity

Negotiation Years

Est

imat

ed P

roba

bilit

y a

Cou

ntry

Has

Not

Joi

ned

1 3 5 7 9 11 13 15

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

High UN Voting Similarity

n=28

Low UN Voting Similarity

n=29


Negotiation Time


Cox proportional hazards modelDataset comprised of 76 applicant countries, 1948-2008

Country observationsGATT Article 33 and WTO Article 12 accession processes onlyTime invariant covariates at date of application

Dependent Variable: Negotiation TimeQuantities of interest: Geopolitical alignment and economicalignmentControls: Market size (GDP), wealth (GDPpc)


Negotiation Time

Model 1 Model 2 Model 3GeopoliticalPolity score 1.045 ** 1.032 0.999UN voting similarity 1.013 ***Ally member count 1.063 **Economic AlignmentOpenness 0.702 1.126 2.168GATT/WTO trade % 0.987PTA trade % 0.968 ***WTO pd 0.270 ** 1.025n / countries in sample 76 76 59

country applications 61 61 46year coverage 1948-2007 1948-2007 1960-2007

exp(coef) point estimates***=1% signif; **=5% signif; *=10% signif

Some support that geopolitical alignment correlated with negotiationtime, weak support for economic alignment


Case Studies

Case Studies

JapanU.S.: inclusion would “contribute to the political stability of thePacific area”Fear cheating by Japan - dumping below cost, violating patentsApply on independence in 1952, three years of negotiationsJapan offers few concessions and protects home marketBritain and others approve accession but refuse MFN treatment(Article 35) for another decadeForeign policy dimension justifies lower standard for accession

MexicoReject joining GATT in 1947 as pursue import substitutionPostpone 1979 application after national debate and decision toassert independence from U.S.Finally join in 1986 after embrace both economic liberalizationprogram and closer ties with United States


Conclusion

Conclusion

What Attracts New Members?Geopolitical alignment advances demand and supply ofmembership

Members adjust entry conditions to serve foreign policy prioritiesApplicants seek free-ride from their friends

Economic alignment has mixed effectsCountries applied at all levels of economic alignment to the regimeNo evidence that GATT/WTO followed sequential liberalization

Shift from GATT to WTOLonger, tougher negotiations, but foreign policy still matters!

International cooperation is based on common interests definedbroadly rather than in terms of narrow issue preferences


joining the club: accession to the gatt/wto · joining the club: accession to the gatt/wto...

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