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Special and differential treatment of developing countries in the WTO

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Conconi, Paola and Perroni, Carlo (2015) Special and differential treatment of developing countries in the WTO. World Trade Review, 14 (1). pp. 67-86. doi:10.1017/S147474561400041X ISSN 1474-7456.

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Official URL: http://dx.doi.org/10.1017/S147474561400041X

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Abstract

In this paper, we examine the theoretical rationale for WTO rules on the special and differential treatment (SDT) of developing countries. We describe a model of bilateral trade between a small country and a large trading partner, in which the small country suffers from a domestic commitment problem in trade policy. This problem arises because investors in the import-competing sector lobby the government to enact and maintain protectionist policies. We show that a reciprocal trade agreement, in which the large country lowers its tariffs conditionally on the small country doing the same, creates a ‘carrot and stick’ mechanisms that helps the small country to overcome its commitment problem. If capacity in the import-competing sector can only be reduced gradually, the agreement may need to allow the small country to delay the implementation of its trade liberalization commitments, in line with SDT provisions in the WTO. Our analysis suggests that, if reconciled with the principle of reciprocity, SDT can help developing countries to liberalize and improve their trading prospects.

Item Type: Journal Article
Subjects: H Social Sciences > HC Economic History and Conditions
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Developing countries -- Economic aspects , World Trade Organization, Commercial treaties , Tariff , Protectionism, Lobbying
Journal or Publication Title: World Trade Review
Publisher: Cambridge University Press
ISSN: 1474-7456
Official Date: 2 January 2015
Dates:
DateEvent
2 January 2015Published
14 October 2014Accepted
Volume: 14
Number: 1
Page Range: pp. 67-86
DOI: 10.1017/S147474561400041X
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
Date of first compliant deposit: 7 September 2016
Date of first compliant Open Access: 7 September 2016
Funder: Fonds national de la recherche scientifique (Belgium) (FNRS)

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