A New TradeTheory of GATT/WTO Negotiations

I o¤er a new explanation for why GATT/WTO negotiations have been so suc-cessful in achieving trade liberalization by providing new rationales for the fun-damental GATT/WTO principles of reciprocity and nondiscrimination. Relative to the standard terms-of-trade theory, my theory makes three main contributions: First, it builds on a new trademodel rather than the neoclassical trade model and thereby closes an important gap in the literature on GATT/WTO negotiations. Second, it does not rely on the terms-of-trade e¤ect and therefore avoids a mech-anism whose real-world relevance many observers doubt. Third, it is immediately consistent with the fact that GATT/WTO regulations do not constrain export taxes and therefore o¤ers a solution to the puzzle identi\u85ed by Ethier (2002). JEL classi\u85cation: F12, F1