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When Will WTO Membership Signal Commitment to Free Trade by A Developing Country

Author

Listed:
  • Murshed, S. Mansoob

    (Institute of Social Studies)

Abstract

A signalling game involving three parties: a developing country, the WTO and a developed country is outlined. The developing country might be tempted to renege or deviate from free trade. Although the costs of reneging from free trade result in a loss of credibility, the costs come in the future and are discounted. Short-term gains include revenues from import taxes that are important to the public finances of low-income countries. Membership of a rules based organisation such as the WTO can act as a credible commitment device. In these circumstances, however, the South’s commitment to free trade depends upon a clear signal from the North that it too is committed to free trade. Otherwise the South will continue to deviate from optimal and freer trade policies.

Suggested Citation

  • Murshed, S. Mansoob, 2004. "When Will WTO Membership Signal Commitment to Free Trade by A Developing Country," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 19, pages 317-331.
    • Handle: RePEc:ris:integr:0277
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    Cited by:

    1. Makmun Syadullah & Adwiena Dwiyanti, 2020. "Position of Indonesia in WTO Reform," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 42-51.

    More about this item

    Keywords

    WTO; North-South trade; Commitment; Delegation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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