Chapter 8. The Design of Trade Agreements

What does economics have to say about the design of international trade agreements? We review a literature on this question, providing detailed coverage on three key design features of the GATT/WTO: reciprocity, nondiscrimination as embodied in the MFN principle, and tariff bindings and binding “overhang.” Each of these features is central to the design of the GATT/WTO and we argue that an economic perspective can go a long way toward revealing a consistent logic to the inclusion of these design features in trade agreements.