Maybe not. While theory, casual empiricism and strong statements
abound, there is, to my knowledge, no compelling empirical evidence
showing that the WTO has in fact encouraged trade. My latest
research shows that WTO membership is not associated with enhanced
trade, once standard factors have been taken into account. To be
more precise, the trade patterns of countries acceding or belonging
to the WTO do not differ significantly from those of
non-members.
This finding is important, for two reasons. First, the mandate of
the WTO is trade liberalisation. Second, the system is widely
considered to be a success. While some might disagree that trade
should be freed by the multilateral system, it is hard to find
dissent from the view that trade has been liberalised by the
system.
Not all multilateral trade institutions have been ineffectual.
The Generalised System of Preferences extended from the north to
developing countries approximately doubles trade. Thus we know that
we have the data and methodology to measure the effects.
I have compared trade patterns for countries in the Gatt/WTO with
those outside the system, taking other factors into account and
using variation across countries (since not all countries are in the
system) and time (since membership has grown).
Twiddling with the model, the data set, or the methodology does
not affect the central conclusion: Gatt/WTO membership has
economically and statistically tiny effects on trade. And there is
no evidence that entry into the Gatt/WTO has had an effect on the
ratio of aggregate trade to gross domestic product. The reason for
this is that membership is not significantly correlated with
measures of trade policy. In other words, there is almost no
evidence that belonging to the Gatt/WTO has liberalised trade
policy. It is therefore unsurprising that the system has not
stimulated trade.
Take one example. In 1987, Indian tariff revenues reached 53 per
cent of import values. India had been a founding member of the Gatt
in 1948. Yet Indian tariff revenues have never fallen below 20 per
cent of Indian imports, at least during the 25 years for which we
have data.
Comparable tariff data exist for 91 countries in 1987. At that
time 89 countries had lower tariffs than India. Twenty-three of
those countries were not members of the Gatt but had tariff rates
averaging 15.7 per cent. Gatt members collected tariffs averaging
11.4 per cent (a figure that is statistically indistinguishable from
that of outsiders). Average tariff rates have been insignificantly
different for members and non-members for all years since 1974.
Perhaps the Gatt has not had much of an effect on trade but the
WTO will. Time will tell. In the meantime we should all question the
assumption that the WTO has in fact liberalised trade or is in the
process of doing so.
The writer is professor of economics at Berkeley's Haas School
of Business and author of Do We Really Know that the WTO Increases
Trade?
http://www.cepr.org/
