Market-Protecting Institutions and the World Trade Organization's Ability to Promote Trade

Jesse C. Johnson; Mark Souva; Dale L. Smith

doi:10.1111/isqu.12077

Market-Protecting Institutions and the World Trade Organization's Ability to Promote Trade

Jesse C. Johnson, Mark Souva, Dale L. Smith

Research output: Contribution to journal › Article › peer-review

12 Scopus citations

Abstract

Recent research has shown that the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO), contrary to common perceptions, does not increase trade. We argue that the effect of the GATT/WTO on dyadic trade flows is conditioned by the strength of market-protecting institutions (MPIs), which are the fundamental determinant of transaction costs. Dyads with weak MPIs do not see an increase in trade from GATT/WTO membership while dyads that have strong MPIs do see an increase in trade from GATT/WTO membership. In the former case, the benefits of GATT/WTO membership are outweighed by the high risk of doing business under weak market protection, but when property rights are well protected, GATT/WTO membership contributes positively to international trade. Empirical analysis of bilateral trade flows from 1948 to 1999 supports this hypothesis.

Original language	English
Pages (from-to)	410-417
Number of pages	8
Journal	International Studies Quarterly
Volume	57
Issue number	2
DOIs	https://doi.org/10.1111/isqu.12077
State	Published - Jun 2013

ASJC Scopus subject areas

Sociology and Political Science
Political Science and International Relations

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10.1111/isqu.12077

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abstract = "Recent research has shown that the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO), contrary to common perceptions, does not increase trade. We argue that the effect of the GATT/WTO on dyadic trade flows is conditioned by the strength of market-protecting institutions (MPIs), which are the fundamental determinant of transaction costs. Dyads with weak MPIs do not see an increase in trade from GATT/WTO membership while dyads that have strong MPIs do see an increase in trade from GATT/WTO membership. In the former case, the benefits of GATT/WTO membership are outweighed by the high risk of doing business under weak market protection, but when property rights are well protected, GATT/WTO membership contributes positively to international trade. Empirical analysis of bilateral trade flows from 1948 to 1999 supports this hypothesis.",

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Market-Protecting Institutions and the World Trade Organization's Ability to Promote Trade

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