Developing Countries and the World Trade Organization: A Foreign Influence Approach

Journal of International Trade and Economic Development, 2009

BBVA Working Paper No. 0912

32 Pages Posted: 6 Sep 2009

See all articles by K. C. Fung

K. C. Fung

University of California at Santa Cruz

Alicia García-Herrero

Bruegel; Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS); Natixis

Alan Siu

The University of Hong Kong - School of Economics and Finance

Date Written: March 30, 2009

Abstract

This paper aims at providing an analytical examination of the criticism that the WTO is unfair and hurts the weak, developing countries. We utilize a formal model with the following features: in both the powerful and weak economies, pressure groups lobby to influence their trade policies in their respective countries. We then allow the powerful country the exclusive ability to spend resources to facilitate the lobbying of one of the lobby groups in the weak country, thereby moving the trade policy of the developing country in favor of the powerful trading partner. Next we compare the effects of such asymmetric foreign influence in a world with no WTO and no multilateral principles (most-favored-nation principle MFN and the negotiation principle of reciprocity) to a situation with WTO and its associated nondiscrimination principles. We show that the weak, developing country will have less "unfair" concessions of market openings and in general will be better off with the WTO and with rules of nondiscrimination.

Suggested Citation

Fung, K.C. and Garcia-Herrero, Alicia and Siu, Alan K. F., Developing Countries and the World Trade Organization: A Foreign Influence Approach (March 30, 2009). Journal of International Trade and Economic Development, 2009, BBVA Working Paper No. 0912, Available at SSRN: https://ssrn.com/abstract=1468111

K.C. Fung

University of California at Santa Cruz ( email )

Santa Cruz, CA 95064
United States
831-459-3273 (Phone)
831-459-5900 (Fax)

Alicia Garcia-Herrero (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS) ( email )

IAS 2019, Lo Ka Chung Building,
Lee Shau Kee Campus, HKUST
Clear Water Bay, Kowloon
Hong Kong

Natixis ( email )

France

Alan K. F. Siu

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
+852 2859 2192 (Phone)
+852 2548 1152 (Fax)

HOME PAGE: http://www.econ.hku.hk/~asiu

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