Is the WTO Truly Effective?
Author(s)
Yutaka Kurihara*
ABSTRACT
Whether or not the World Trade Organization (WTO) has promoted international trade is under dispute. This article uses a revised traditional gravity model to conduct empirical examination of this problem and found that WTO has recently promoted international trade and that the degree of increase is larger in developed countries than in developing ones. Moreover, regional trade agreements (RTA), currency unions, GDP, and distance are related to the increase of international trade along with the effects of WTO activities. On the other hand, the effect of distance on international trade has been decreasing. Improvements in information technology (IT) may have influenced this finding.
Whether or not the World Trade Organization (WTO) has promoted international trade is under dispute. This article uses a revised traditional gravity model to conduct empirical examination of this problem and found that WTO has recently promoted international trade and that the degree of increase is larger in developed countries than in developing ones. Moreover, regional trade agreements (RTA), currency unions, GDP, and distance are related to the increase of international trade along with the effects of WTO activities. On the other hand, the effect of distance on international trade has been decreasing. Improvements in information technology (IT) may have influenced this finding.
Cite this paper
Y. Kurihara, "Is the WTO Truly Effective?," iBusiness, Vol. 4 No. 2, 2012, pp. 121-125. doi: 10.4236/ib.2012.42014.
Y. Kurihara, "Is the WTO Truly Effective?," iBusiness, Vol. 4 No. 2, 2012, pp. 121-125. doi: 10.4236/ib.2012.42014.
References
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[1] M. Tomz, J. L. Goldstein and D. Rivers, “Do We Know That the WTO Increase Trade? Comment,” American Economic Review, Vol. 97, No. 5, 2007, pp. 2005-2018. doi:10.1257/aer.97.5.2005 [2] A. K. Rose, “Do We Really Know that the WTO Increase Trade,” American Economics Review, Vol. 97, No. 5, 2007, pp. 2019-2025. doi:10.1257/aer.97.5.2019 [3] X. Liu, “GATT/WTO Promotes Trade Strongly: Sample Selection and Model Specification,” Review of Interna- tional Economics, Vol. 17, No. 3, 2009, pp. 428-446. doi:10.1111/j.1467-9396.2009.00816.x [4] B. Christopher, “A Re-Examination of the Relation between Democracy and International Trade,” The Journal of International Trade & Economic Development, Vol. 20, No. 5, 2011, pp. 585-600. [5] B. J. Frickel, V. V. Kotcherlakota, F. A. Tekorang, and B. R. Elder, “The Effect of NAFTA on Trade and Invest- ment between Member Countries,” International Business and Economics Research Journal, Vol. 10, No. 6, 2011, pp. 1-8. [6] C. K. Lee, “WTO Negotiations between Democracy and Developed Countries: An Evolutionary Game Theory Approach,” International Journal of Management, Vol. 28, No. 3, 2011, pp. 867-879. [7] I. Siedschlag and G. Tondl, “Regional Output Growth Synchronisation with the Euro Area,” Empirica, Vol. 38, No. 2, 2011, pp. 203-211. doi:10.1007/s10663-010-9130-7 [8] S. Coulibaly, “Evaluating the Trade Effect of Developing Regional Trade Agreements: A Semi-Parametric Appro- ach,” Journal of Economic Integration, Vol. 24, No. 4, 2009, pp. 709-743. [9] J. Korinek and M. Melatos, “Trade Impacts of Selected Regional Trade Agreements in Agriculture,” OECD Trade Policy Working Paper, No. 87, 2009, P. 59. [10] I. Park, “Regional Trade Agreements in East Asia: Will They Be Sustainable?” Asian Economic Journal, Vol. 23, No. 2, 2009, pp. 169-194. doi:10.1111/j.1467-8381.2009.02008.x [11] Y. Kurihara, “The Impact of Regional Trade Agreements on International Trade,” Modern Economy, Vol. 2, No. 5, 2011, pp. 846-849. doi:10.4236/me.2011.25094 [12] A. Vamvakidis, “Regional Trade Agreement or Broad Liberalization: Which Path Leads to Faster Growth?” IMF Economic Review, Vol. 46, No. 1, 1999, pp. 42-52. [13] J. Varzary, “The Failure of Regional and Multinational Trade Agreements,” The Business Review, Vol. 17, No.1, 2011, pp. 235-240. [14] L. Xuepeng, “Testing Conflicting Political Economy Theories: Full-Fledged Partial-Scope Regional Trade Agreements,” Southern Economic Journal, Vol. 77, No. 1, 2010, pp. 78-103. doi:10.4284/sej.2010.77.1.78 [15] V. Vicard, “On Trade Creation and Regional Trade Agreements: Does Depth Matter?” Review of World Eco- nomics, Vol. 145, No. 2, 2009, pp. 167-187. doi:10.1007/s10290-009-0010-9 [16] Y. Kurihara, “APEC: International Trade and Economic Growth,” Pacific Economic Review, Vol. 10, No. 2, 2003, pp. 27-42. [17] S. Freitag, “Adopting External Currencies for Trade Growth in the Pacific,” Asian-Pacific Economic Litera- ture, Vol. 25, No. 1, 2011, pp. 103-120. doi:10.1111/j.1467-8411.2011.01273.x [18] J. Roy, “On the Robustness of the Trade-Inducing Effects of Trade Agreements and Currency Unions,” Appalachian State University Working Papers, Vol. 10, No. 9, 2010, pp. 1-39. [19] J. Roy, “Is the WTO Mystery Really Solved?” Economics Letters, Vol. 113, No. 2, 2011, pp. 127-130. doi:10.1016/j.econlet.2011.06.010 [20] R. A. Frankel and A. Rose, “The Endogeneity of the Op- timum Currency Area Criteria,” The Economic Journal, Vol. 108, No. 449, 1998, pp. 1009-1025. doi:10.1111/1468-0297.00327 [21] H. Katayama and M. Melatos, “The Nonlinear Impact of Currency Unions on Bilateral Trade,” Economics Letters, Vol. 112, No. 1, 2011, pp. 94-96. doi:10.1016/j.econlet.2011.03.022 [22] P. Krugman, “Lessons of Massachusetts for EMU,” In: F. Glavazzi and F. Torres, Eds., The Transition to Economic and Monetary Union in Europe, Cambridge University Press, New York, 2001, pp. 241-261. [23] A. Subramanian and S. Wei, “The WTO Promotes Trade, Strongly but Unevenly,” Journal of International Eco- nomics, Vol. 72, No. 1, 2007, pp. 151-175. doi:10.1016/j.jinteco.2006.07.007 [24] T. S. Eicher and J. Henn, “In Search of WTO Trade Effects: Preferential Trade Agreements Promote Trade Strongly But Unevenly,” Journal of International Eco- nomics, Vol. 83, No. 2, 2011, pp. 137-153. doi:10.1016/j.jinteco.2010.12.002 [25] Y. Lee, “Reconciling RTAs with the WTO Multinational Trading System: Case for a New Sunset Requirement on RTAs and Development Facilitation,” Journal of World Trade, Vol. 45, No. 3, 2011, pp. 629-651. [26] F. Tesón, “Why Free Trade Is Required by Justice,” So- cial Philosophy and Policy, Vol. 29, No. 1, 2012, pp. 126-153. doi:10.1017/S0265052511000112 [27] M. Debasri and S. Pozo, “Exchange-Rate Volatility and Trade: A Semiparametric Approach?” Applied Economics, Vol. 43, No. 3, 2011, pp. 1617-1620. doi:10.1080/00036840802600327 [28] J. E. Anderson and E. van Wincoop, “Gravity with Gravitas: A Solution to the Border Puzzle,” American Economic Review, Vol. 93, No. 1, 2003, pp. 170-192. doi:10.1257/000282803321455214 [29] A. Fragikos and V. C. Nikos, “US Patents Abroad: Does Gravity Matter?” Journal of Technology Transfer, Vol. 36, No. 4, 2011, pp. 404-416. [30] M. Kukenova and J. Monteiro, “Does Lax Environment Regulation Attract FDI When Accounting for ‘Third- Country’ Effects?” MPRA Paper, No. 11321, 2008. [31] D. H. Brooks and F. Benno, “Asia’s Melting Trade Costs,” The World Economy, Vol. 34, No. 7, 2011, pp. 1138-1150. doi:10.1111/j.1467-9701.2011.01369.x