Joining the Club:Accession to the GATT/WTO
Christina DavisMeredith Wilf
Department of PoliticsPrinceton University
November 12, 2011
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 1 / 22
Introduction
Trade Regime Membership
GATT/WTO Membership Growth
year
GAT
T/W
TO M
embe
rs a
s P
erce
nt o
f All
Cou
ntrie
s
1948 20101955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
0.0
0.2
0.4
0.6
0.8
1.0
GATT WTO
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 2 / 22
Introduction
Puzzles of Trade Regime Membership
Ad hoc conditions for membershipSome countries apply early, others delay
To understand the effectiveness of the regime we must first understandselection into the institution...
What leads a country to join the GATT/WTO?
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 3 / 22
Introduction
Overview
Research Questions:What explains timing of application to join GATT/WTO?What explains length of accession negotiation?
Findings:Geopolitical alignment brings quick application and negotiationWeak evidence that trade openness influences either stage
Contribution:Geopolitical underpinning for cooperation in trade policyFlexible conditionality can be effective
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 4 / 22
Theories of Membership
Literature on Cooperation
Theories of institutional establishment and designFunctional: establish and join to achieve mutual gains (Keohane1984)Institutional design: design accommodates problem structure(Koremenos et al 2001)
Critique that self-selection means institution has little impactEndogenous (Mearsheimer 1994/5), screening (Von Stein 2005)Broad membership or deep commitments (Downs et al 1996)
Theories of membership expansionSequential liberalization: start small, expand conditional onaligned preferences (Downs et al 1998)Differential membership obligations (Gilligan 2004)Economic logic (Copelovitch & Ohls 2011, Pelc 2011)
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 5 / 22
Argument
Argument
Institutions form like-minded groups of states across multipledimensions
Trade regime context:
Geopolitical alignment - “Western” engagementEconomic alignment - liberalize trade
Harmonization with trade regime economic objectives is allowed tooccur after application and membership rather than as a precondition
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 6 / 22
Argument
Hypotheses
1. Geopolitical alignment with GATT/WTO members increases thespeed of application and accession
Existing members have incentives to allow non-members to join nowand liberalize later
Case-by-case, moderate commitmentsAllow free-riding where it supports allies and wins friends
Like-minded members will admit politically aligned applicantsAttracts non-members reluctant to make commitments
Members deepen liberalization on consensus basis over time
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 7 / 22
Argument
Hypotheses
2. Economic alignment with GATT/WTO members increases the speedof application and accession
Compliance costs and opportunity costsTrade-dependent countries can easily comply with reciprocalliberalizationNon-members that trade with GATT/WTO members face higheropportunity costs
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 8 / 22
GATT/WTO Accession
GATT/WTO Accession Rules
Inclusive
All states/territories with control over trade policy eligible
Two accession paths of GATT (1948-1994)
Article 33 - working party negotiationsArticle 26 (former colonies) - no negotiation, immediate approval
One accession path of WT0 (1995Article 12 - working party negotiationsStandardized minimum commitments (all WTO agreementsincluding TRIMS, TRIPS, GATS, etc.)
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 9 / 22
GATT/WTO Accession
Dependent Variables
Time to Apply - non-member state intention to join regimeNegotiation Time - interplay of applicant and existing memberwillingness to agree on accession terms
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Time to Apply
Country Variation in Time to Apply
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 11 / 22
Time to Apply
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−100 −50 0 50 100
0.0
0.5
1.0
1.5
2.0
1 − 2 Yr Applicants
UN Voting Similarity to US
Ope
nnes
s
CAN
CUB
GTI
DOMJAM
TTO
BRB
NIC
GUY
PER
BRACHL
URYGBR
NLDBEL
FRA
CZL
MKD HRV
GRCSWENOR
DNK
GMB
SLEGHA
NGAUGATZA
TURIND
MMR
MYS
IDN
AUSNZL
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−100 −50 0 50 100
0.0
0.5
1.0
1.5
2.0
3 − 11 Yr Applicants
UN Voting Similarity to US
Ope
nnes
s
BLZSUR
BIHCYP
MDA
EST
LVA
LTU
UKR
BLRARM
GEOAZE SEN
BEN
MRT
NER
CIV
BFA
CMR
GAB
CAF
TCD
COG
RWA MDG
MUS
TUN
KGZ
UZB
KAZ
SGP
BRN
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−100 −50 0 50 100
0.0
0.5
1.0
1.5
2.0
12 − 26 Yr Applicants
UN Voting Similarity to US
Ope
nnes
s
DMA
GRD
LCAVCTKNA
COL ARG
IRL
ESP
PRT
POL
HUN
YUGYUG
ROU ISLCPV
COD
DJIAGO
MOZZMBSYC
DZAEGY
ISR
BHR
QAT
ARE
OMN
MDV
PNGVUT
SLB
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−100 −50 0 50 100
0.0
0.5
1.0
1.5
2.0
27+ Yr Applicants
UN Voting Similarity to US
Ope
nnes
s
BHS
MEX
GTM
HND
SLV
CRI
PANVEN ECU
BOL PRY
ALB
BGR
RUS
STPGNQ
MLI GINETHCOM MAR
LBY
SDN
IRN
SYR
LBN
LBNSAU
AFGCHN
MNGNPL
THAKHM
LAO
VNM
PHL
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 12 / 22
Time to Apply
Multivariate Regression
Cox proportional hazards model with time-varying covariatesDataset of 144 nonmember countries, 1948-2008
Country-year observationsCountry enters dataset in year of independence, leaves year afterapplicationStratification by GATT Article 26 eligibilityRobust standard errors, clustered by country
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 13 / 22
Time to Apply
Multivariate Regression
Dependent Variable: Time to ApplyQuantities of interest
Geopolitical alignment: level of democracy, UN voting similarity toUS, shared alliances, aid dependenceEconomic alignment: trade openness, GATT/WTO member tradedependence, PTA trade dependence, Commodity Exports
Controls: Market size (GDP), wealth (GDPpc), former colony, ColdWar, trade round, oil exporter, percent world membership inGATT/WTO
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 14 / 22
Time to Apply
Model 1 Model 2 Model 3GeopoliticalPolity score 1.095 *** 1.059 *** 1.073 ***UN voting similarity 1.014 *** 1.020 **Ally member count 1.065 *** 1.094 ***Aid dependence 1.008 **
Trade StructureOpenness 1.402 1.337 1.218GATT/WTO mbr trade % 0.994 1.012PTA trade % 1.006 1.018 *
n 2035 1562 1222countries in sample 144 119 85
country applications 132 103 71year coverage 1948-2008 1948-2008 1960-2008
exp(coef) point estimates***=1% signif; **=5% signif; *=10% signif
Geopolitical alignment consistently correlated with applicationWeak support that trade openness drives application
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 15 / 22
Time to Apply
Substantive effect, UN Voting Similarity to US
0 10 20 30 40 50
0.0
0.2
0.4
0.6
0.8
1.0
Survival Curve UN
Voting Similarity to United States
Year from Independence
Est
imat
ed P
roba
bilit
y of
Not
App
lyin
g
1st quartileUN votingsimilarity
3rd quartileUN votingsimilarity
0 10 20 30 40 50 60
−1.
0−
0.8
−0.
6−
0.4
−0.
20.
0
First Difference UN Voting Similarity to United States
Years from Independence
Est
imat
ed d
iffer
ence
, 1st
to 3
rd q
uart
ile
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Negotiation Time
Negotiation Time Variation
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 17 / 22
Negotiation Time
Estimated Negotiation Timeby Degree of Openness
Negotiation Years
Est
imat
ed P
roba
bilit
y a
Cou
ntry
Has
Not
Joi
ned
High Openness
n=37
Low Openness
n=25
1 3 5 7 9 11 13 15
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Estimated Negotiation Timeby UN Voting Similarity
Negotiation Years
Est
imat
ed P
roba
bilit
y a
Cou
ntry
Has
Not
Joi
ned
1 3 5 7 9 11 13 15
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
High UN Voting Similarity
n=28
Low UN Voting Similarity
n=29
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 18 / 22
Negotiation Time
Multivariate Regression
Cox proportional hazards modelDataset comprised of 76 applicant countries, 1948-2008
Country observationsGATT Article 33 and WTO Article 12 accession processes onlyTime invariant covariates at date of application
Dependent Variable: Negotiation TimeQuantities of interest: Geopolitical alignment and economicalignmentControls: Market size (GDP), wealth (GDPpc)
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 19 / 22
Negotiation Time
Model 1 Model 2 Model 3GeopoliticalPolity score 1.045 ** 1.032 0.999UN voting similarity 1.013 ***Ally member count 1.063 **Economic AlignmentOpenness 0.702 1.126 2.168GATT/WTO trade % 0.987PTA trade % 0.968 ***WTO pd 0.270 ** 1.025n / countries in sample 76 76 59
country applications 61 61 46year coverage 1948-2007 1948-2007 1960-2007
exp(coef) point estimates***=1% signif; **=5% signif; *=10% signif
Some support that geopolitical alignment correlated with negotiationtime, weak support for economic alignment
Davis-Wilf (Princeton University) GATT/WTO Accession November 12, 2011 20 / 22
Case Studies
Case Studies
JapanU.S.: inclusion would “contribute to the political stability of thePacific area”Fear cheating by Japan - dumping below cost, violating patentsApply on independence in 1952, three years of negotiationsJapan offers few concessions and protects home marketBritain and others approve accession but refuse MFN treatment(Article 35) for another decadeForeign policy dimension justifies lower standard for accession
MexicoReject joining GATT in 1947 as pursue import substitutionPostpone 1979 application after national debate and decision toassert independence from U.S.Finally join in 1986 after embrace both economic liberalizationprogram and closer ties with United States
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Conclusion
Conclusion
What Attracts New Members?Geopolitical alignment advances demand and supply ofmembership
Members adjust entry conditions to serve foreign policy prioritiesApplicants seek free-ride from their friends
Economic alignment has mixed effectsCountries applied at all levels of economic alignment to the regimeNo evidence that GATT/WTO followed sequential liberalization
Shift from GATT to WTOLonger, tougher negotiations, but foreign policy still matters!
International cooperation is based on common interests definedbroadly rather than in terms of narrow issue preferences
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