The Economics of the World Trading System

The Economics of the World Trading System

By Kyle Bagwell and Robert W. Staiger





World trade is governed by the rules of the World Trade Organization (WTO), the successor to the General Agreement on Tariffs and Trade (GATT). The WTO sets rules of conduct for the international trade of goods and services and for intellectual property rights, provides a forum for multinational negotiations to resolve trade problems, and has a formal mechanism for dispute settlement. It is the primary institution working, through rule-based bargaining, at freeing trade.

In this book, Kyle Bagwell and Robert Staiger provide an economic analysis and justification for the purpose and design of the GATT/WTO. They summarize their own research, discuss the major features of the GATT agreement, and survey the literature on trade agreements. Their focus on the terms-of-trade externality is particularly original and ties the book together. Topics include the theory of trade agreements, the origin and design of the GATT and the WTO, the principles of reciprocity, the most favored nation principle, terms-of-trade theory, enforcement, preferential trade agreements, labor and environmental standards, competition policy, and agricultural export subsidies.


Out of Print ISBN: 9780262025294 238 pp. | 6 in x 9 in 13 illus.


$30.00 X ISBN: 9780262524346 238 pp. | 6 in x 9 in 13 illus.


  • An excellent deserves to be widely read.

    Journal of Economics


  • This excellent book develops an elegant and powerful rationale for international trade agreements: to resolve terms of trade externalities. This insight explains many of the features of GATT and the WTO and allows us to understand many of the issues on today's trade agenda. Even if you think there is more to the WTO than just the terms of trade, this is a fundamental contribution—a 'must-read' for all serious trade scholars.

    L. Alan Winters

    Professor of Economics, University of Sussex

  • Bagwell and Staiger have developed an elegant theoretical framework for understanding the reality of multilateral trade agreements. This book is a key source for anyone interested in GATT and the WTO, not only economists but also political scientists and international law scholars.

    Giovanni Maggi

    Department of Economics, Princeton University

  • We are fortunate that economists of the caliber of Bagwell and Staiger have been drawn to work on the trading system. By applying analytical rigor to the key features of the GATT/WTO system, the authors offer us refreshing and useful insights into what lies behind the design of trading rules. They also point out key areas where we need more research. This is a valuable book.

    Patrick Low

    Director of Development and Economic Research, World Trade Organization