Institutions and Outcomes: the Gatt/wto and Postwar Trade

The abundant literature about institutions regards the postwar trade regime as its " beau ideal " (Goldstein, Rivers, and Tomz 2007a, 38). Yet, it was only five years ago that Andrew Rose published the first systematic empirical analysis of its effects. Contravening conventional wisdom, he found that the General Agreement on Tariffs and Trade and its successor, the World Trade Organization, did not exert any significant impact on trade (Rose 2004). In a paper published in IO in 2007, Tomz (hereafter GRT) argue that Rose incorrectly assigned to the base group many states that had standing in the GATT. Expanding its membership roster accordingly, they find that the regime had a large, positive, and significant impact on its members' trade regardless of their level of development (2007b, 57). In this research note, I argue that testing the empirical implications of existing theories can yield considerably more insight into the effects of the postwar regime. While the GRT paper examines carefully whether trade expansion varies as a function of the ways states joined the GATT/WTO, it does not test the predictions that existing theories make about the processes that governed postwar tariff bargaining under its auspices. This is so despite the fact that these predictions associate variations in process with variations in outcomes among different subsets of member states. More specifically, market-failure theory implies that a regime will exert its strongest impact on a small set of very large states, because it enables them to realize a Pareto-improving equilibrium outcome of a Prisoners' Dilemma (PD) game. As the regime required most-favored nation (MFN) treatment, a natural extension of this prediction is that smaller countries with relative factor endowments similar to those of the largest states will also realize a sizeable expansion of their trade. Finally, the theory implies that other countries