World Trade Organization and Trade Agreements: A Theoretical Investigation

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Over the last seventy years, following the General Agreement on Tariffs and Trade (GATT), the world has experienced a substantial liberalization of the international trade. At first, the liberalization process was carried out through a sequence of rounds of multilateral trade negotiations based on the non-discriminatory principle. Starting in the eighties of the previous century, the bilateral or mega-regional preferential liberalization has become the engine for a further and more profound proliferation of free trade, albeit on a discriminatory basis. Why do countries sign trade agreements? Are multilateral and preferential liberalization complimentary or opposing forms of opening up international trade? Should the World Trade Organization search for new ways of liberalization as many experts consider the Doha Round of multilateral trade negotiations to be a failure? These are the central questions that our project aims at analyzing.In two scientific work-packages (WPs), this project will investigate the impact of bilateral preferential liberalization on the formation of the world trading system. Moreover, we shall contribute to the unexplored avenues of the research on mega-regional trade agreements and on plurilateral liberalization (WP1). In WP2 we aim at extending the literature on the motives for trade agreements. More specifically, we aim at extending the domestic-commitment motive explanation of TAs by developing a theoretical model connecting the decision on TAs and the degree of liberalization to “political fundamentals”. Furthermore, we shall analyze the issue of high applied MFN tariffs observed even after preferential liberalization between countries. WP3 will organize the research cooperation.