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Abstract

Vol. 50, No. 1, pp. 2-10 (1999)

“The Economic Significance of the GATT/WTO Rules”
Michihiro Ohyama (Department of Economics, Keio University)

This paper illustrates the economic significance of the rules of the GATT/WTO, which constitute the basis of the world trading system. It shows that the basic principles of non-discrimination and reciprocity are conducive to reaching mutually advantageous and efficient agreements in bilateral or multilateral trade negotiations. In the presence of industrial adjustment costs, however, instantaneous and global trade liberalization is not necessarily desirable even by the standard of economic efficiency. This paper argues that the GATT/WTOs conditional approval of regional economic integration, as well as its endorsement of gradual liberalization, is justified when adjustment costs of trade liberalization is substantial.