Would WTO members free ride on most-favored-nation treatment?

CAI Hongbo1,2 HU Shuang3 ZHAO Tianyuan4

(1.Business School, Beijing Normal University )
(2.Collaborative Innovation Center for Aviation Economy Development)
(3.Shanghai Jiao Tong University)
(4.School of Economics, Fudan University)

【Abstract】This article matches China’s foreign trade data in 2004 and the 2004–2007 average MFN rate data to the 1139 kinds of goods classification under standards HS02, and uses OLS and instrumental variables in empirical analysis of the impact of “free rider” behavior of the Member States on MFN rates in multilateral negotiations. The study finds that member states “free-rider” phenomenon exists in China’s participation in multilateral negotiations; “free rider” behavior has weak positive impact on MFN rates. Accordingly, this paper advises that China should keep active attitude in multilateral negotiations, pay attention to regional agreements and bilateral negotiations policy to reduce reliance on multilateral negotiations and avoid distortions caused by the current inefficiency of negotiations.

【Keywords】 WTO; most-favored-nation treatment; free ride; multilateral trade negotiations;

【DOI】

【Funds】 Interdisciplinary Construction Project of Beijing Normal University Youth Project of National Natural Science Foundation of China (71403024); Special Project of Fundamental Research Funds for Central Universities (SKZZY2015020); Personal Project of Talents Cultivation Fund of Organization Ministry of Beijing (2015000020124G060); 2015–2017 General Project of All-China Federation of Returned Overseas Chinese (15BZQK231). Shanghai Knowledge Service Platform for Universities, Strategic Studies Institute of Shanghai International Trade Center and Economics and Construction Project of Central and Eastern Europe Research Center, Shanghai University of International Business and Economics.

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    Footnote

    [1]. ① Herfindahl Hirschman Index (HHI) is normally used to measure market concentration degree. It is calculated with the quadratic sum of the percentages of market players in an industry in total industrial income or total assets (market share); higher HHI indicates greater market concentration. The calculation formula is: , where Mi denotes the income of each player in the market. It is applied in the article as the kernel variable HHIi to indicate commodity’s import concentration, namely, where GATT denotes GATT member state that is granted MFN treatment, and MFN denotes all countries accorded MFN treatment. [^Back]

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 12, Pages 64-73

December 2016

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Article Outline

Abstract

  • Introduction
  • 1 Literature review
  • 2 Quantifiable samples
  • 3 Econometric model and variable research
  • 4 Empirical results and analysis
  • 5 Conclusion
  • Footnote

    References