The Economics of the World Trading System

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.