American Economic Review: Vol. 89 No. 1 (March 1999)
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The Role of Multilateral Institutions in International Trade Cooperation
Maggi, Giovanni. 1999. "The Role of Multilateral Institutions in International Trade Cooperation." American Economic Review, 89(1): 190-214.
The World Trade Organization (WFO) lacks the power to directly enforce agreements. It is, therefore, important to understand what role the WTO can play to facilitate international cooperation and whether a multilateral institution can offer distinct advantages over a web of bilateral agreements. This paper examines two potential benefits of a multilateral trade institution: first, verifying violations of the agreements and informing third parties, thus facilitating multilateral reputation mechanisms; second, promoting multilateral trade negotiations rather than a web of bilateral negotiations. The model suggests that a multilateral approach is particularly important when there are strong imbalances in bilateral trading relationships.
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Maggi, Giovanni (Princeton U)
F13: Trade Policy; International Trade Organizations