With World Trade Organization negotiations stagnant, and preferential trade agreements (PTAs) rapidly proliferating, international trade relations are shifting markedly toward bilateralism. The resulting fragmentation in the international trade regime poses serious risks to economic welfare and the coherence of international trade law. Similar challenges have been faced in the international investment regime, which is comprised of a highly fragmented network of bilateral investment treaties (BITs). However, scholars have identified several mechanisms that promote harmonization in the international investment regime. Among these are cross-treaty interpretation in dispute settlement and the inclusion of most-favoured nation (MFN) clauses in BITs. This paper assesses the scope for these two mechanisms to emerge in the international trade regime by comparing the legal framework, institutional dynamics, and political economy of the trade and investment regimes. The analysis suggests that cross-treaty interpretation is likely to emerge in the trade regime as PTA dispute settlement activity increases and that greater use of MFN clauses in PTAs is a viable possibility. These developments would mitigate the effects of fragmentation and advance harmonization in the international trade regime.

The entry into force of the General Agreement on Trade in Services in 1995 marked a new stage in the history of the multilateral system. Given the peculiarities of services trade, the Agreement contains a variety of conceptual innovations, including its extension to transactions (modes of supply), beyond conventional cross-border trade, and various types of non-tariff restrictions. In turn, the new concepts needed time to be absorbed by the ministries and agencies involved, many of which might have been surprised by ‘their’ sectors being covered by a trade agreement and the ensuing government-internal coordination needs. Thus, understandably, the schedules that emerged from the Uruguay Round, which still account for the majority of current commitments, contain a variety of ill-specified entries. Such entries undermine the transparency and predictability of market conditions, thereby affecting trade and investment decisions in services. Poorly specified commitments also give rise to trade disputes. While the scheduling conventions agreed for the Doha Round provided for technical refinements that would leave the substance of commitments unchanged, this possibility was used far more sparingly than could have been expected. Moreover, additional flaws would have been introduced if some of the (preliminary) offers had entered into effect. The following discussion tries to explain the scope for refinements and develop a clearer picture of the commitments warranting correction – whether in the form of a final Doha Round outcome or through negotiation-independent action by WTO Members.

The Aid for Trade Initiative needs to be revamped. This article describes the challenges the Initiative faces and describes the pros and cons of possible reforms. The Aid for Trade Initiative succeeded in mobilizing quickly a large amount of financial resources. However, because the Doha Round talks stalled, the aid mobilized could not support the implementation of a multilateral agreement. Instead, it was spent on various projects, some of them not clearly related to trade. This affected developing countries confidence in the Initiative. To make matters worse, in the midst of a fiscal crisis that threatens development budgets, the Initiative had difficulties showing convincing results. In order to preserve resource mobilization, the WTO is expanding the scope of the Initiative to new areas only remotely related to trade and the trade and development nexus. This is unlikely to build confidence. The WTO should rather narrow the scope of the Initiative in order to make it more focused and efficient.

On 15 August 1971, President Richard Nixon closed the gold window and imposed a 10% surcharge on all dutiable imports in an effort to force other countries to revalue their currencies against the dollar. The import surcharge was lifted four months later after the Smithsonian agreement led to new exchange rate parities. This paper examines the political, economic, and legal issues surrounding this use of trade sanctions to achieve exchange rate adjustments.

The field of international relations has been obsessed with democracy and democratization and its effects on international cooperation for a long time. More recently, research has turned its focus on how international organizations enhance democracy. This article contributes to this debate and applies a prominent liberal framework to study the ‘outside-in’ effects of the World Trade Organization. The article offers a critical reading of democratization through IO membership. It provides for an assessment of the dominant framework put forward by Keohane et al. (2009). In doing so, it develops a set of empirical strategies to test conjectured causal mechanisms with respect to the WTO, and illustrates the potential application by drawing on selected empirical evidence from trade politics. Finally, it proposes a number of analytical revisions to the liberal framework and outlines avenues for future research.

We compute ad valorem equivalents (AVEs) for the regulation in three service sectors (i.e. fixed telecom, mobile telecom, distribution) applied by selected emerging countries. We start with qualitative information on the restrictions applied by each country in each sector; we apply a multivariate statistical approach to transform this qualitative data into a trade restrictiveness synthetic index (STRI). In a second stage, we estimate the average impact of STRI on price–cost margins. In the third stage, this impact is used to calculate the AVE of the STRI estimated in the first step. It is shown that the STRI has a significant effect on the price–cost margins of the individual firms only when controlled for Regional Trade Agreements and exception to the MFN clause in the considered sector. Lastly, we compute tariff equivalents for the STRIs previously calculated using the estimated impact. More than half our AVEs are larger than 50% and one AVE out of six is above 100%.

Following years of silence, the WTO Appellate Body (AB) issued almost simultaneously three reports dealing with issues coming under the aegis of the WTO Agreement on Technical Barriers to Trade (TBT). The three Panel reports were hard to reconcile, and this feature in and of itself made the task of the AB quite onerous. Some progress has been made and some clarifications have been introduced, but overall the AB has yet to come to grips with a coherent approach regarding the understanding of the TBT Agreement. The main argument in this paper is that the AB, in designing its test for consistency with the TBT Agreement, did not do any different than it would have done had no TBT Agreement existed. It is, nevertheless, response to the question ‘what has the TBT added to the pre-existing legislative arsenal’ that should point to the elements that must be included in developing a test of consistency against which disputes coming under the aegis of the TBT Agreement should be discussed. The suggested approach consists of a two-tier test whereby Panels would first inquire into the innate characteristics of a measure coming under the aegis of the TBT Agreement, before asking the question whether it has also been applied in non-discriminatory manner.

The emergence of Airbus transformed the market structure of the LCA industry into a duopoly of similar-sized full-range manufacturers. The financing of Airbus's upfront investment expenditures came in a significant proportion from public funds, which violated, in the US's opinion the SCM Agreement. While the Appellate Body follows this view of things to a large extent, it does so in a measured way: the category of per se illegal export subsidies is interpreted with a view to the manipulation of normal market conditions; the distortion on competitive conditions matters, not the increase of exports as such. Other aspects of subsidies law clarified are the relationship between effect and subsidy. They are closely related but not identical; rightly, the report operates from the premise that the SCM Agreement's regime focuses on the effect, and not on the subsidy as such, which is a manifestation of a political choice by a sovereign Member state. The Appellate Body affirms that a subsidy has a ‘life’, a shorthand for a beginning and an end: it follows that the effect of a subsidy is not bound to be permanent but is bound to terminate. It is to be regretted that the Appellate Body avoided clarifying to what extent partial privatization, hence sale of assets at market prices to private investors, ‘extinguish’ subsidies.

Accession to the World Trade Organization (WTO) is unlike accession to other global organizations. It is extremely demanding on applicant countries, time consuming and essentially power- rather than rule-based. This article argues that existing WTO members select themselves into the Working Party of applicant countries, the body which determines the timing and conditions of accession, in order to have the option to strategically delay membership by the applicant and/or extract concessions from it. Existing members will select themselves into a specific Working Party if their own trade interests are strongly affected, which will be the case if the existing member's bilateral trade with the applicant country forms a large share of its income, unless both countries already have a preferential trade agreement (PTA) between them. Trade interests are also strongly affected if the existing member competes with the applicant in terms of export product and market structure. Conversely, where both member and applicant have more PTAs with third countries of large economic size in common, potential accession will affect the member's trade interests less. An empirical analysis of Working Party membership since 1968 estimates to what extent these three different facets of trade interests are substantively important determinants of Working Party composition.

This paper reviews the extent of reductions in tariffs on environmental goods (EGs) by country participation in the negotiations mandated by a Doha Ministerial Decision in November 2001. Symptomatic of the cleavages across countries throughout the Round, little progress was achieved during the negotiations in defining an approach to a multilateral reduction in protection of EGs. Conflicting interests and differing perceptions of the benefits from increased trade in EGs was reflected in the different approaches proposed by members (request and offer, integrated project, list approach, hybrid approach), and for the few countries (13) that adopted a list approach, there was little overlap across submissions. For all income groups, on average, EGs are less protected than other goods and countries reduced protection by about 50% from initial levels in 1996 leaving little room for further exchange of market access. Difficulties in applying the two complementary conceptions of EGs: (i) ‘goods for environmental management’, and (ii) ‘environmentally preferable products' are reviewed and mentioned as reasons for the lack of progress during the negotiations. Inspection of the submission lists against a ‘core list’ of 26 EGs drawn up by the WTO shows that this ‘core list’ was mostly made up of products in which developed countries had a comparative advantage, and that countries that submitted lists generally avoided including on their lists the most highly protected goods.

Transparency in the multilateral trade system is fundamental. Monitoring the compliance of WTO members with their obligations is an important part of that transparency, and timeliness in the notification of compliance is crucial. In the case of domestic support to agriculture, the notifications of compliance with obligations has been slow and opaque. But another database exists that could both illuminate the extent to which policy instruments are correctly notified and provide a convenient way to ensure timely ‘pre-notifications’ in the event that delays occur in the future. This note shows how the OECD database can be used, for example, to shed light on the extent to which payments to producers that require production as a matter of eligibility are presently notified to the WTO as having no effect on production. We also demonstrate the feasibility of using OECD data to construct ‘pre-notifications’ by calculating the (as yet un-notified) domestic support notifications for the EU for the years 2009/10 and 2010/11.

This paper analyzes a number of economic and legal issues raised by the Appellate Body Report in the Thai–Cigarettes case. The paper suggests two improvements that could be made to Panel procedures; supports the Appellate Body's interpretation of Article XX(d) in the present case, which seems to discard an earlier mistaken approach to Article XX; and examines, in some detail, whether the Appellate Body's application of the ‘less favourable treatment’ component of GATT Article III:4 in this and other cases is consistent with its jurisprudence under GATT Article III:2 and TBT Article 2.1. From an economics perspective, the case is straightforward on its face. However, the Appellate Body's rigorous application of the ‘less favourable treatment’ principle might not survive a fuller market analysis in terms of policy impacts on conditions of competition. Further, while we agree with the rejection of Thailand's Article XX claim, we raise the question of whether a strict national-treatment rule may be an unwarranted constraint on policy where there is a clear trade-related external cost to address.

Measuring trade barriers in services is complex due to all the non-tariff barriers that exist. In this paper we rely on quantity measures using gravity equation. In order to take into consideration the presence of zero flows in the database, we use a sample selection model. Then, we use the results of both stages of the model to derive tariff equivalents based on the distribution of the estimated residuals. Applying this methodology to the Eurostat database, we obtain tariff equivalents for a large number of countries and for 11 services sectors. Our main conclusions are that protection is not homogeneous among sectors for a country and that services openness is not directly linked with the level of development. Our results are robust to changes in specification, but we do find that OLS estimations overestimate the commercial openness of the countries with many zero flows.

We present a new dataset of international trade costs in services sectors. Using a theory-based methodology combined with data on domestic shipments and cross-border trade, we find that trade costs in services are much higher than in goods sectors: a multiple of two to three times in many cases. Trade costs in services have remained relatively steady over the last ten years, whereas trade costs in goods have fallen overall at an impressive rate. We show that even in a regional grouping that has done much to promote a single market in services–the EU–there remains considerable heterogeneity in trade costs across countries. Our findings generally suggest an important role for future policy reforms to reduce the regulatory burdens facing services sectors and facilitate trade in services.