Does WTO Membership Make a Difference at the Extensive Margin of World Trade?

Abstract

Becoming a member of the World Trade Organization (WTO) is not just a question of “raising one’s hand.” Accession is subject to a complex negotiation process, which is costly and which involves demands from existing member countries that applicant countries do not necessarily consider to be in their own immediate interest. Perhaps inevitably bilateral or regional arrangements may often seem more attractive than WTO Membership. Accession commitments relate to market access, as well as policy rules not directly related to trade. Both add up to something like a “price” for WTO Membership.¹ Although the price tag is negotiable, the negotiating process is somewhat biased in favor of existing members. Moreover, there is evidence that the price has risen through time; see Evenett and Primo Braga (2005). Yet, countries are willing to pay this “price.” so there must be a benefit. Arguably the most important and immediate benefit is an expected increase in exports to existing member countries, beyond the levels that would otherwise be reached.