WTO Membership and Market Access

1
WTO Membership andMarket Access

• Simon J. Evenett,
• Jonathan Gage, and
• Maxine Kennett
• 25 October 2004
• University of Sussex seminar

2
Motivation and Hypotheses

• Quid pro quo at the heart of the world trading
  system.
• WTO accessions.
• Two hypotheses concerning the effects of WTO
  accession on exports
• Falling MFN tariff rates.
• Improved security of access (Cordell Hull,
  Jackson, diplomats, etc.)

3
Doubts about these hypotheses

• Doubts raised by scholars
• Rose and successors.
• Doubts raised by trade negotiators from SSA,
  South Asia, and Caribbean during the Doha Round.
• Role of preferential market access.
• Preference erosion.

4
Industrial country tariff regimes terminology

• WTO-related tariff regimes
• Bound and applied rates.
• Reciprocity.
• Free trade areas.
• Preferential tariffs for exporters from
  developing countries.
• GSP.
• Non-reciprocal and discretionary.
• Differences in terms and security of market
  access.

5
Departure from literature

• Ongoing versus new WTO membership.
• Modern gravity approaches.
• Aggregate bilateral trade flows.
• Long panels.
• Controls.
• Identification Dummy variables.
• But what are the mechanisms?
• Country studies.
• GSP regimes.

6
Empirical strategy

• Evaluate two hypotheses concerning export growth
  of two recent WTO accessions to Quad countries,
  using modern gravity approaches, disaggregated
  trade flow and barrier data, and numerous
  controls.
• Why Bulgaria and Ecuador?
• Why the Quad countries?
• Why disaggregated trade data?

7
Link to modern gravity theory
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Base estimating equation
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Augmented estimating equation
10
Trade data collected

• Statistics Canadas World Trade Analyzer
  database.
• Dependent variable.
• Market size variable
• Value of production
• Proxy constructed.
• Product-line specific fixed effects.

11
Tariff data collected

• UNCTADs TRAINS database.
• 6 digit to 4 digit product lines.
• GSP tariff rates.
• PTA tariff rates.
• MFN tariff rates.
• Proxy for pre-accession tariff rates.

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Parameter estimates
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Parameter estimates
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Other specifications for Bulgaria
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Other specifications for Ecuador
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Other comments on parameter estimates

• gt35 specifications estimated for both countries.
• 5 values of variable a.
• Systematic trimming of outliers.
• Performance of control variables.
• Market size variable.
• Proxy for production levels.

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Quantitative significance of parameter estimates

• Bulgaria 19.24 of post-accession export growth
  to industrialised countries can be attributed to
  falling MFN rates.
• Ecuador 1 reduction in MFN rates increases
  trade by at least 2.
• These two countries trade flows have been
  non-trivially affected by WTO membership.

18
Summary of findings

• Cannot reject one WTO accession-related
  hypothesis in each country.
• Interaction between GSP and MFN rates.
• Caveats
• Noisy data.
• Short panel.
• Inability to observe uncertainty faced by
  exporters.
• Endogenity of tariffs and NTBs.