MAS Staff Paper No. 27, Feb 2004

Does The WTO Make Trade More Stable?

By Professor Andrew K Rose, Haas School of Business, University of California, Berkeley. This paper was prepared while Professor Rose was visiting the Economic Policy Department, MAS, in December 2003.

Abstract

I examine the hypothesis that membership in the World Trade Organization (WTO) and its predecessor the General Agreement on Tariffs and Trade (GATT) has increased the stability and predictability of trade flows. I use a large data set covering annual bilateral trade flows between over 175 countries between 1950 and 1999, and estimate the effect of GATT/WTO membership on the coefficient of variation in trade computed over 25-year samples, controlling for a number of factors. I also use a comparable multilateral data set. There is little evidence that membership in the GATT/WTO has a significant dampening effect on trade volatility.

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