Is the WTO Truly Effective?

Abstract

Whether or not the World Trade Organization (WTO) has promoted international trade is under dispute. This article uses a revised traditional gravity model to conduct empirical examination of this problem and found that WTO has recently promoted international trade and that the degree of increase is larger in developed countries than in developing ones. Moreover, regional trade agreements (RTA), currency unions, GDP, and distance are related to the increase of international trade along with the effects of WTO activities. On the other hand, the effect of distance on international trade has been decreasing. Improvements in information technology (IT) may have influenced this finding.

Trade integration, product diversification and the gravity equation: evidence from the Chinese merchandise imports

“…Trade integration effects are often assessed by introducing institutional dummies which refer to the countries’ WTO membership or conclusion of FTAs. The WTO dummy variable indicates the enhancing effect of sharing common rules of international trade (Subramanian and Wei, 2007; Kurihara, 2012; Magerman et al , 2016). Eicher and Henn (2011), however, suggest that the omitted variable bias is responsible for the differentiated findings among studies taking into account the effect of WTO entry on bilateral trade.…”