We describe recent work on the theory of trade agreements that speaks to the purpose and design of GATT. Our discussion proceeds in three steps. First, we examine the purpose of a trade agreement. In both the traditional economic and the political-economy approaches to the study of trade...

What is the optimal number of currencies in the world? Common currencies affect trading costs and, thereby, the amounts of trade, output, and consumption. From the perspective of monetary policy, the adoption of another country's currency trades off the benefits of commitment to price stability...

Trade liberalization and political separatism go hand in hand. In a world of trade restrictions, large countries enjoy economic benefits because political boundaries determine the size of the market. In a world of free trade and global markets even relatively small cultural, linguistic or ethnic...

Despite the important roel played by GATT in the world economy, economist have nto developed a unified theoretical framework that interprets and evaluates the principles that form the foundation of GATT. Our purpose here is to propose such a framework. Working within a general equilibrium trade...

This paper shows that smaller countries have larger public sectors as a share of GDP, and are also more open to trade. These empirical observations are consistent with recent theoretical models explaining country formation and break up

and non-discrimination, the two principles that are the pillars of the multi- lateral trading system as embodied in GATT and its successor, the WTO. We show that GATT's principle of reciprocity serves to neutralize the world-price effects of a country's trade policy decisions, and hence can...

We consider a 3 country world in which each country's import market is served by competing exporters from its 2 trading partners. We assume that weak multilateral enforcement mechanisms prevent governments from implementing efficient trade policies through a multilateral agreement requiring...

We explore the impact of the formation of regional free trade agreements on the ability of countries to maintain low cooperative multilateral tariffs. We assume that countries can not make binding international commitments, but are instead limited to self-enforcing arrangements. Specifically, we...

We consider the design and implementation of international trade agreements when: (i) negotiations are undertaken and commitments made in the presence of uncertainty about future political pressures; (ii) governments possess private information about political pressures at the time that the...