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COMMITTING TO GROW:

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THE FULL IMPACT OF WTO ACCESSIONS

Adam Jakubik

IMF

André Brotto

University of St. Gallen

Roberta Piermartini

WTO

Prepared for the IMF-WB-WTO Conference 4-5 October 2021

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Disclaimer: This is a working paper, and hence it represents research in progress. The views expressed in this paper are those of the authors and do not necessarily represent the views of the WTO or its members, or the views of the IMF, its Executive Board, or IMF management, and are without prejudice to members' rights and obligations under the WTO.

 

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1

MOTIVATION

2

WHAT DO WE DO?

3

BACKGROUND: THE ACCESSION PROCESS

4

EMPIRICAL SPECIFICATION

5

RESULTS

6

ENDOGENEITY ISSUES

 

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  • Several channels through which WTO can affect growth
  • Empirical evidence on the impact of WTO accession on trade has established a clear connection between the extent of commitments and trade performance.

Subramanian and Wei (2007), Tomz et. al (2007); Dutt (2020)

  • Tang and Wei (2009) the only empirical paper assessing growth impact of WTO
    • They find: the economy of a country joining the GATT/WTO is on average permanently larger by 20% if it undertook commitments as part of the accession process.
    • Former colonies or overseas territories of GATT members that acceded under Article XXVI 5(c) of the GATT did not benefit.

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  • Brotto, Jakubik, and Piermartini (2020) extended T&W to 1950-2017 and 150 economies
    • On average, joining the WTO through Article XII resulted in a 30% permanent increase in GDP

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2

1

MOTIVATION

 

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T&W Redux: Heterogeneity by mode of accession and over time

  •  

3

Significant effect

before accession

 

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A map by accession modes

Article XII Members

Article XXVI Members

Article XXXIII/Founding Members

 

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​

Question: Do commitments taken to enter the WTO have an impact on growth?

  • Focus on Art. XII economies

  • Using original data on negotiation proceedings and implementation of commitments, we build two indices that capture the heterogeneity in the timing of reforms in the pre- and post-accession periods.

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5

2

WHAT DO WE DO?

 

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    • Positive effect of reforms on growth not only after WTO entry, but also during the accession process.
      • 5-year after accession, economies are on average 44% larger than had they not acceded.

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    • Results robust to endogeneity (IV and falsification tests)

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    • No significant effect of WTO accession for non-Article XII

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6

2

WHAT DO WE FIND?

 

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An heterogeneous processes

The length between application and accession varies a lot.

LDC status, timing and representativeness only explain some of the variation.

Accession Length

Distance in years between application and accession dates

Others

LDC’s

Big economies

3

BACKGROUND: THE ACCESSION PROCESS for Art. XII economies

 

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THE ACCESSION PROCESS

Length and important milestones

After the release of the MFTR countries negotiate their structural commitments through questions and answers.

Parallel to WP meetings, countries negotiate, bilaterally, concessions on market access.

Tariff bindings have an implementation period after accession.

Application

MFTR Release

2,1 y

WP Meetings

WP Report

Goods Schedule

Accession

Final Bindings Implemented

7,7 y

6,3 y

1,1 y

0,6 y

9,3 y

Average Length

 

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THE ACCESSION PROCESS

Questions Examples | Croatia

Application

MFTR Release

2,1 y

WP Meetings

WP Report

Goods Schedule

Accession

Final Bindings Implemented

7,7 y

6,3 y

1,1 y

0,6 y

9,3 y

….prior to accession to the WTO, Croatia will bring the existing legislation to conform with WTO principles.

Could Croatia elaborate on the two systems in place, for domestic and imported goods ?

WT/ACC/HRV/11 - Question 48 | 1996

WT/ACC/HRV/11 - Answer to Question 48

Croatia applies an excise tax differently with respect to domestic and foreign products. When will Croatia definitely bring the existing legislation in conformity with Article III?

WT/ACC/HRV/30 - Question 39 |1997

The existing legislation on excise taxes will be brought into conformity with Art. II of GATT on 1 January 1998.

WT/ACC/HRV/30 - Answer to Question 39

According to the reply to question 39 of WT/ACC/HRV/ 30, Croatia states that changes […] is to enter into force on 1 January 1998. Please give a status report on the implementation of these revised taxes.

WT/ACC/HRV/39 - Question 11 | 1998

 

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Pre-ACCESSION INDEX: the numerator

Viet Nam’s Example

Publication of Q&A Docs.

WP Meetings

ACCESSION�Jan/2007

Jul/1998

Dec/1998

Jul/1999

Nov/2000

Apr/2002

May/2003

Dec/2003

Jun/2004

Dec/2004

Sep/2005

Mar/2006

Jul/2006

Oct/2006

Oct/2006

MFTR Release�Sep/1996

Mar/1998

Apr/1999

Jul/1999

Jun/2000

Ago/2001

Mar/2003

Oct/2003

Apr/2004

May/2004

Oct/2004

Apr/2005

Jul/2005

Sep/2005

Dec/2005

Jun/2006

Sep/2006

Oct/2006

Oct/2006

 

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Pre-ACCESSION INDEX

Significant variations across Article XII economies

Assumption: the number of commitments undertaken can be proxied by the number of questions asked during the WP meetings. Evidence: 65% correlation

 

 

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POST-ACCESSION INDEX

Tariff Commitments and Schedules

The post-accession index varies on average across 26% of tariff lines that are not immediately implemented

Country

Implementation of Final Bound

 

Country

Implementation of Final Bound

 

 

Max years

Immediate

 

 

Max years

Immediate

 

 

 

 

 

 

 

Afghanistan

3

99.8%

 

Lithuania

8

94.5%

Albania

9

63.6%

 

Republic of Moldova

4

64.5%

Armenia

4

98.1%

 

Mongolia

8

83.6%

Bulgaria

14

41.0%

 

Montenegro

10

82.8%

Cabo Verde

10

38.4%

 

Nepal

10

7.5%

Cambodia

10

99.4%

 

Oman

9

64.2%

China

9

45.3%

 

Panama

14

51.1%

Chinese Taipei

9

55.3%

 

Russian Federation

8

42.7%

Croatia

7

79.4%

 

Samoa

10

99.2%

Ecuador

11

98.2%

 

Saudi Arabia

10

88.7%

Estonia

6

91.8%

 

Seychelles

8

99.9%

Georgia

6

53.1%

 

Tajikistan

7

46.6%

Jordan

10

69.5%

 

North Macedonia

9

63.2%

Kazakhstan

5

63.5%

 

Tonga

1

100%

Kyrgyzstan

7

43.7%

 

Ukraine

5

97.2%

Lao People's DR

10

99.6%

 

Vanuatu

3

99.1%

Latvia

9

82.3%

 

Viet Nam

12

59.4%

Liberia

3

95.8%

 

Yemen

0

100.0%

 

 

 

 

 

 

 

Article XII members

7.7

73.9%

​

​

​

​

of which LDCs

6.8

69.2%

of which accession year <= 2000

9.0

63.2%

​

of which non-LDCs

8.5

75.0%

of which accession year > 2000

12.0

59.4%

​

 

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POST-ACCESSION INDEX

Significant variations across Article XII economies

 

 

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DATA AND SPECIFICATION

4

 

  • Extending Tang and Wei (JIE, 2009) by 15+17 Article XII accessions:
    • Article XII (15+17 countries) – 30% larger after 5 years
    • Article XXVI 5(c) (16 comparable) – no commitments, negligible effect
    • All but Article XXVI 5(c) (32+12, at least some commitments) –

25% larger after 5 years

  • Selection issue: gap between application and accession,

Heckman procedure

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  • Depth and timing of accession commitments matter

 

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DATA AND SPECIFICATION

ff

4

 

 

 

(1)

(2)

(3)

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  • 150 countries, 1951-2017

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  • Data sources: WTO; Penn World Tables; UCDP/PRIO Armed Conflict Dataset; Penn World Tables Human Capital Index.

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  • SE robust to heteroscedasticity and autocorrelation (Driscool and Kraay, 1998)

 

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RESULTS

5

(within)

 

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6

Robustness and Endogeneity

Selection/pro-reform government effect: long and variable lag between application and accession (Tang and Wei, 2009). Accession date decided by Working Party, depends on existing members. Speed not correlated with chief executive power.

12/34 Article XII members had same “chief executive party” in power at application & accession. 6/12 very stable, in power >10 years before application

IV: accession index of nearest neighbours’ accessions by geography and/or time. Results robust.

Driven by time-trend? Falsification test: IV using randomized member’s index produces insignificant results.

Future Research

Further research needed to identify the specific types of reforms undertaken during WTO accession with the greatest impact on growth. Requires typology of Article XII accession commitments, mapping to legislation, and the dates of implementation.

 

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Thank you!

Comments, questions and critics are more than welcome.

 

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6

Appendix 1

2SLS Results

 

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6

Appendix 2

Falsification test - 2SLS Results with randomized instrument country

 

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DESCRIPTIVE ANALYSIS

2

Catching up wealthier peers