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Why do Some Countries Get Better WTO Accession Terms than Others?

Krzysztof Pelc
McGill University
Krzysztof Pelc
McGill University
Open Panel

Abstract

The process by which countries accede to the World Trade Organization (WTO) has become the object of considerable debate. Here, I ask: what determines the concessions the institution requires of an entrant? In other words, who gets a good deal, and who does not? This paper posits that given the institutional design of accession proceedings and the resulting suspension of reciprocity, accession terms are driven by the domestic export interests of existing Members. Specifically, import-reliant economies, and the import-reliant industries within them, will be imposed relatively greater liberalization upon accession, something that would appear in opposition to expectations during multilateral trade rounds, where mt acss functions a a valuable bargaining chit. The empirical evidence supports these beliefs. Looking at 18 recent entrants at the six-digit product level, I find that controlling for a host of country-specific variables, as well as the applied protection rates on a given product prior to accession, import-reliant countries and sectors are made to bind themselves considerably more tightly upon accession. Moreover, I show how more democratic countries, in spite of their greater overall depth of integration, will exhibit greater resistance to adjustment in key industries. The final finding concerns the curvilinear effect of wealth. On the one hand, Members exercise restraint vis-à-vis the poorest countries, as per the institution''s norms. On the other h the ichest countri s have the greatest bargaining capacity and thus obtain better terms. The outcome, as I show using a semi-parametric analysis, is that it is middle-income countries that end up having to make the greatest relative adjustments to their trade regimes.