)x Myanmar: UN Statistics Division (Internet: http://unstats.un.org/unsd/cdbdemo). The number is the UN estimate,derived only from the 1990The current GDP in US$ is used for voting weight calculation, rather than PPP GDP (current GDP is the GDP in localcurrency converted into current US dollars whereas the PPPGDP is con verted into international dollars using purchasingpower parity rates). Although the latter may be more appropriate for the purpose of WTO voting weight calculation, theformer is utilized for its easiness of data availability.Openness:Openness is the percentage of average import value to averageGDP level both for the period of 1998–2000. The import valueis taken from WDI On-line, which takes the data originallyfrom IMF BoP and World Bank staff estimates. The exceptionsto this are for following countries:xxx
xx
Democratic Republic of the Congo: DOTS taken fromIMF Direction of Trade Statistics 2001Brunei Darussalam: DOTS taken from IMF Direction ofTrade Statistics 2001Taiwan: National Statistics, the undefined imports (C.I.F.),undefined whether goods and services are included(Internet: http://www.stat.gov.tw/bs8/stat/english1.htm)Cyprus: IFS taken from IMF Direction of Trade Statistics2001Liechtenstein: Government website; the import figure wasnot available and it is substituted by the figure of industrial exports, originally denoted in CHF then convertedinto US$ for 1999 and 2000 (Internet: http://llvweb.liechtenstein.li/lisite/html/liechtenstein/index.jsp).Exchange rates for 1999 and 2000 are taken from Balanceof Payments Yearbook 2002, Country Tables, IMF
Towards Supplementary Weighted Voting
xxx
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Qatar: IFS for 1998 and 1999 and DOTS for 2000United Arab Emirates: IFS taken from IMF Direction ofTrade Statistics 2001Members of European Union (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,Luxembourg, Portugal, Spain, Sweden and United Kingdom): The imports from other EU members are subtractedfrom WDI data. Such intra-EU import statistics is takenfrom Direction of Trade Statistics – Yearbook 2001, IMF
PopulationThe source WDI On-line taking data originally from WorldBank staff estimates from various sources including the UNStatistics Division’s Population and Vital Statistics Report,country statistical offices and Demographic and Health Surveys from national sources and Macro International.The exceptions to this are for following countries:xx
Taiwan: National StatisticsLiechtenstein: Office of National Economy, the figure in2001 is not available is taken from 2000.
Fritz Breuss
Does the ‘Development Round’ Foster Development?I.II.
IntroductionMultilateral Trade Liberalization and DevelopmentA. Openness, Growth and Poverty Reduction1. The Trade and Development Linkage2. What Determines the Huge Income Differencesin the World?B. Is WTO Membership Good for Trade at All?III. After Eight GATT Rounds – Markets Remain StillSubtly Protected: Market Access IssuesA. Patterns of ProtectionB. Divergence of Applied Tariffsand their BindingsC. Developing Countries Face Higher Barriersto their Exports than Industrial CountriesD. Tariff Peaks and Tariff Escalation1. Tariff Peaks2. Tariff EscalationE. Contingent Protection1. Antidumping Measures2. Standards and Non-tariff Barriers to TradeF. Trade PreferencesG. Regionalism versus Multilateralism1. Increasing Attractiveness of RTAs2. Does the EU Need the WTO at All?H. Developing Countries’ Market Access inAgriculture1. Costs of Agricultural Distortion2. Removing Agricultural Subsidies alone isNegative for Developing Countries
232235235235240244246246248249252253260264264265266270270274277278279
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3. Agricultural Liberalization Benefits allCountriesI. Developing Countries’ Market Access in Textileand ClothesIV. Gains from Trade Liberalization under aSuccessful Doha RoundA. Formula Approaches to Market AccessNegotiations1. The General Procedure of Negotiations2. The Danger of Preference Erosion for theDeveloping CountriesB. How to Estimate Gains from Multilateral TradeLiberalization?1. UNCTAD Simulations2. CGE Model Simulations with ImperfectCompetitionV. ConclusionsReferencesAppendix: Tables and Figure on World Trade
280282286286286290292294297303304313
I. IntroductionAfter the failed attempts in Seattle in late 1999, the MinisterialConference in its Fourth Session in Doha, on November 9-14, 2001launched the agenda for a new comprehensive round of multilateraltrade negotiations. At the behest of the European Union (EU), theministerial declaration emphasised that the Doha Round shouldprovide a major opportunity for developing countries. Consequentlythe agenda for the new WTO round has been coined the ‘Doha Development Agenda’ (DDA). On September 10-14, 2003 the fifthMinisterial Conference in Cancún ended without reaching a consensus.According to press reports and subsequent statements by thosepresent at that meeting, the apparent and proximate cause of theMinisterial’s collapse was a failure to agree on launching formalnegotiations on the so-called Singapore Issues. Others, however,have put forward alternative explanations for the meeting’s failure,including poor chairmanship of the Ministerial meeting by Mexicos’s Foreign Minister, Mr. Luis Ernesto Derbez; a failure to agreeon the modalities for negotiations on agricultural trade barriers,
Does the ‘Development Round’ Foster Development?
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export subsidies, and domestic support policies; the inability ofmany WTO members to negotiate or discuss many issues simultaneously during and before the Cancún Ministerial Conference; anda perception that some national representatives in Cancún were notprepared to go beyond pre-determined demands of others andshowed little propensity to ‘negotiate seriously’ with other delegations.1The Doha Round was after all aiming at opening markets in order to foster growth and alleviate poverty in the developing world.In this respect Cancún was a ‘disaster’ which could badly hit thedeveloping countries, in particular the least developing countries(LDCs), notwithstanding the emergence of the G90 and G22.2 Although the previously-agreed commitments by WTO members arestill binding, the Cancún failure may have political consequences.On the one hand liberalization (market access) is delayed; on theother hand representatives of the United States and the EU immediately afterwards expressed their sympathy with a switch in theirtrade policy preferences towards more bi- or unilateralism.Before Cancún, public opinion was focusing on the interpretation of the TRIPs agreement, concerning the enforcement of intellectual property rights for affordable medicines (compulsory licenses, production of generic drugs) to protect health in case ofdiseases such as AIDS. The WTO TRIPs agreement of August 30,2003 together with a similar solution of the EU for this problem(Council Regulation 953/2003) has been a major achievement inlegal and economic terms and from a moral point of view. It is,however the only result of Cancún.Some commentators argue that the present round was not only‘overburdened’ by the so-called Singapore Issues (which are primarily in the interest of the developed world) but also by puttingdevelopment considerations at the centre of the Doha Round.Evenett even questions the new development mandate of the WTOat all. This agenda is an intricate menu of objectives and means thatcould lead to deceptive or undesired outcomes.3The DDA contains a series of other key issues on which progress has been delayed as a follow up of Cancún (even the follow123
Evenett (2003), 11.Fontagné (2003), 3.Evenett (2003), 16.
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up conference in Geneva on December 15-16, 2003 did not bring abreak-through):1. Implementation-related issues: The developing world considers that developed economies have not fulfilled their commitments of Marrakech (1994) concerning the pace of liberalization in labour intensive industries (implementation of theAgreement on Textiles and Clothing – ATC), whereas theirown commitments (TRIPs) are disproportionate.2. Agriculture: Market access as well as the distorting domesticpolicies (subsidies in the USA and EU) are key issues.3. Services (GATS).4. Market access for non-agricultural products.5. The four Singapore issues: the relationship between trade andinvestment policy; the interaction between trade and competition policies; transparency in public procurement practices;and trade facilitation practices (more efficient customs procedures).46. LDCs: Considering their specific needs: duty-free, quota-freemarket access for their products; Special and DifferentialTreatment (SDT); technical co-operation and capacity buildingetc.The DDA raises a lot of concerns which are dealt with in thisarticle. In the next chapter the relationship between market access(trade liberalization) and development and its complex connectionswith poverty reduction are analysed. Their relationships are farfrom clear. The third chapter addresses market access issues, ranging from the problems of tariff peaks and escalation to more subtleforms of protectionism still in place vis-à-vis the developing countries. The fourth chapter looks at gains from further liberalization ormore generally, the potential loss of welfare and income in the developing countries due to a delayed Doha Round. Conclusions aredrawn at the end.
4
In the Doha Work Programme adopted by the General Cuncil of theWTO on 1 August 2004, the so-called ‘Singapore issues’ wer putaside. No work towards negotiations will take place within the WTOduring the Doha Round (WTO (2004), 3).
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II. Multilateral Trade Liberalization and DevelopmentA. Openness, Growth and Poverty ReductionIn the discussion of whether trade liberalization and foreign directinvestment have helped to spur growth in China and India, the answer by participants at a conference organized by the IMF and India’s National Council of Applied Economic Research in NewDelhi, November 14-16, 2003 was a unanimous and resounding‘yes’, while in the case of broader capital account liberalization,opinions were more divided.5 Although poverty reduction in bothIndia and China has been strongly correlated with economicgrowth, the wide regional differences within the two countries suggest hat other policies are also relevant in enhancing the ‘povertyreduction efficiency of growth’. Participants in this conferencesought to identify the factors behind the two countries’ impressivetrack record over the past two decades. Interestingly, both arenowadays fast growing developing countries but had a quite different attitude towards trade liberalization and membership in worldtrade organizations. India is a GATT signatory country since July 8,1948 and WTO member since January 1, 1995. China became aWTO member only on December 11, 2001.Both countries witnessed an increase in openness. In 1980 theratio to GDP of total trade in goods and services in both India andChina stood at about 15 percent. By 2001, this ratio had more thantripled to about 50 percent in China, while it had risen to onlyaround 25 percent in India.1. The Trade and Development LinkageIn general the question whether more openness is better for growthand development and whether it is even a remedy for poverty reduction is not always easy to answer. There is a huge amount ofdevelopment literature on this topic. The nexus of openness andpoverty reduction is ambiguous and complex. Reimer surveys andclassifies thirty-five studies of the emerging literature which quantifies how international trade affects the poor in developing countries.6 A general discussion of the problems connected with tradeand development linkages is also offered by the UNCTAD.7 The567
IMF (2003).Reimer (2002).UNCTAD (2003).
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manifold relationships between trade and development may bedemonstrated with the Figures 1 and 2.Let’s look first to the mainstream ‘Panglossian’ view in Figure1. Representatives of researchers, seeing a positive link betweenopenness and growth (arrow 1) are Sachs and Warner; Dollar andKraay; Dowrick; Dowrick and de Long; and Greenaway, Morganand Wright.8For a sample of up to 73 countries Greenaway, Morgan andWright9 estimate in a panel over the period 1975 to 1993 a ‘core’new growth theory model. Growth of real GDP per capita is explained by the GDP per capita as in 1965 (catching-up variable), thelevel of secondary school enrolment as in 1965, a terms of tradeindex, population, the ratio of gross domestic investment to GDP(proxy for capital input) and liberalization dummies. They use threedifferent definitions of liberalization, those of Sachs and Warner,Dean et al. and one provided by the World Bank.10 The first is constructed on the basis of measuring whether an economy is open ornot. Their index of openness is based on five criteria relating tonon-tariff barriers, average tariff levels, the black market exchangerate, whether state monopolies exist for major exports and whetherthe economy is socialist or not. By contrast, Dean et al. are morequalitatively based.11 They use information on average nominaltariffs, QR coverage and average black market premia to identifywhen reform has taken place. The liberalization indicator providedby the World Bank is indicated by Structural Adjustment Loans(SAL) as one of a number of possible determinants of growth, export and investment performance.12 Greenaway, Morgan andWright equate the first year of a SAL with a trade component as thebeginning of the liberalization period. The authors find the following empirical results: A low initial GDP and high initial level ofschooling are associated with faster growth in GDP per capita as area higher investment ratio and favourable terms of trade movement.8
9101112
Sachs / Warner (1995); Dollar / Kraay (2001, 2002); Dowrick(1994); Dowrick / de Long (2001); Greenaway / Morgan / Wright(1998).Greenaway / Morgan / Wright (1998).Sachs / Warner (1995), Dean et al. (1994); World Bank (1993).Dean et al. (1994).World Bank (1993).
Does the ‘Development Round’ Foster Development?
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Faster population growth is associated with slower GDP per capitagrowth and liberalization appears to have on average a favourableand substantial (2.7%) impact on growth in years following liberalization. Looking at the impact of the timing of reform on growththey estimate the initial impact of liberalization and the effects oftwo years later. They find evidence of a ‘J curve effect’ of liberalization on per capita GDP growth: in year 1 of liberalization theimpact on growth is negative (but not significant), positive (butinsignificant) in year 2 and positive, larger and significant in year3.13Whereas Dollar and Kraay find no effect from openness toinequality (arrow [2]), Kuznets sees no effect at all between growthan income inequality (arrow [3]). Dollar and Kraay find generallythat ‘growth is good for the poor’. But when average incomes rise,the average incomes of the poorest fifth of society rise proportionately. This holds across regions, periods, income levels, and growthrates.14Openness[policy variable]Positive (1)
No effect (2)No effect (3)
Growth
Inequality
Negative (4)
PovertyFigure 1: The Mainstream Panglossian View that Openness is Sufficient for Poverty Reduction.Source: Milanovic (2002)
In a less simplistic view it is found that openness is not achoice variable and its effects on poverty reductions are ambiguousand complex (see Figure 2). Many authors, such as Rodríguez and1314
Greenaway / Morgan / Wright (1998).Dollar / Kraay (2001), Kuznets (1995).
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Rodrik, O’Rourke, and Vamvakidis find that the link between openness and growth is not always positive (arrow [1] in Figure 2).15Openness, however, may have a more indirect positive impact ongrowth via technology spill-overs. Coe and Helpman for the industrial countries and Coe, Helpman and Hoffmaister for the „NorthSouth trade’ in particular – in line with the endogenous growththeory – study the effects of R&D spillovers via imports on TFPgrowth in the importing countries.16 Hence, more openness maypotentially lead to more growth.A positive link between growth and openness is postulated byBairoch in a world historic perspective. He sets the record straighton twenty commonly held myths about economic history. Amongthese are that free trade and population growth have historically ledto periods of economic growth; that a move away from free tradecaused the Great Depression; and that colonial powers in the nineteenth and early twentieth centuries became rich through the exploitation of the Third World. Bairoch argues that these beliefs arebased on insufficient knowledge and misguided interpretations ofthe economic history of the United States, Europe, and the ThirdWorld.17 This position is comparable to that of Chang. By historically analysing the reasons why the poor countries remain poor hereaches the conclusion that the nowadays-rich industrial countries(like the USA, England, Germany, and Japan) and the newly industrializing countries (NICs; like Korea, Taiwan) followed a differentstrategy than they suggest to the developing countries. They did notstart their development by liberalizing trade. In contrast they startedwith protecting their markets and made industrial and export-led(subsidy) policy. When becoming successful they simply ‘kickedaway the ladder’. A similar strategy was also followed by the rapidgrowing China.18The relationship between openness and inequality may bepositive, neutral or even negative (arrow [2]). Representatives ofstudies with such ambiguous results are Milanovic, Ravallion, andBarro.19 The link between growth and inequality is unclear. Many1516171819
Rodríguez / Rodrik (2001), O’Rourke (2000); Vamvakidis (1998).Coe / Helpman (1995); Coe / Helpman / Hoffmaister (1997).Bairoch (1993).Chang (2002).Milanovic (2003), Ravallion (2003), Barro (1999).
Does the ‘Development Round’ Foster Development?
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authors find a negative relationship, whereby the causality runsfrom inequality to growth (arrow [3]). More (less) inequality is bad(good) for growth.20 For a recent survey of the literature on inequality and growth, see Leoni and Pollan.21 It is often claimed – notonly by globalization critiques – that growth may have a negativeimpact on poverty, meaning more growth is connected with greaterpoorness (arrow [4]). Even if trade liberalization results in aggregate welfare gains over all households, it is possible that the pooresthouseholds could lose. Harrison, Rutherford and Tarr demonstratewith a computable general equilibrium (CGE) model two approaches to designing trade liberalization in Turkey which ensurethat the poor will not lose. The first approach uses direct compensation to losers. The second approach uses limited policy reform,where exceptions to the across-the board reform are chosen to meetthe equity goal. In each case, the authors map out some of the efficiency costs of attaining these equity goals so as to inform policymakers about the least costly way of attaining them.22Anderson et al. evaluate the fear that China’s accession toWTO will impoverish its farmers via greater import competition inits agricultural markets. Results of simulations with the GTAP CGEworld model suggest that farm/no-farm income inequality may wellrise within China but rural-urban income inequality need not.23
20212223
See Alesina / Rodrik (1994); Persson / Tabellini (1994); Perotti(1993); Perotti (1996).Leoni / Pollan (2003).Harrison / Rutherford / Tarr (2003).Anderson et al. (2004).
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Openness[not fully a choicevariable]Not alwayspositive (1)Positive (5)
Negative,positive orneutral (2)
Unclear
Growth
InequalityNegative (3)
Negative (4)
Poverty
Figure 2: A Less Simplistic View: Openness is not a Choice Variable and its Effects on Poverty Reduction are Ambiguous andComplexSource: Milanovic (2002)
2. What Determines the Huge Income Differences in the World?In a comprehensive study, Rodrik, Subramanian and Trebbi as wellas Rodrik estimate the respective contributions of institutions, geography, and trade in determining income levels around the world.Their results indicate that the quality of institutions ‘trumps’ everything else. Once institutions are controlled for, measures of geography have at best weak direct effects on incomes; also trade isalmost always insignificant, and often enters the income equationswith the ‘wrong’ (i.e., negative) sign.24In the voluminous literature on the determinants of the hugeincome differences in the world (average income levels in theworld’s richest and poorest nations differ by a factor of more than100), three strands of thoughts stand out:251. Geography: Geography is a key determinant of climate, endowment of natural resources, disease burden, transport costs,and diffusion of knowledge and technology from moreadvanced areas. Geography has a direct effect on incomes,through its effect on agricultural productivity and morbidity.2425
Rodrik / Subramanian / Trebbi (2002); Rodrik (2003a); Rodrik(2003b).See Rodrik / Subramanian / Trebbi (2002), 1-5.
Does the ‘Development Round’ Foster Development?
2.
2627
241
This is shown with arrow (1) in Figure 3. It may also have anindirect effect through its impact on distance from markets andthe extent of integration (arrow [2]) or its impact on the qualityof domestic institutions (arrow [3]). As geography is as exogenous a determinant as an economist can ever hope to get, it iseasiest to identify the causality. Representatives of this schoolare Diamond; Gallup, Sachs and Mellinger, and Sachs.26Integration view: Another camp emphasizes the role of international trade as a driver of productivity change. This view (alsoidentified as trade fundamentalists) gives market integration,and impediments thereof, a starring role in fostering economicconvergence between rich and poor regions of the world. Thisschool and also the third school of institutionalists have itharder, since they have to demonstrate the causality of theirpreferred determinants, as well as identify the effective channels through which it works (see Figure 3). For the trade fundamentalists the task consists of showing that arrows (4) and(5) – capturing the direct impact of integration on income andthe indirect impact through institutions, respectively – are therelevant ones, while arrows (6) and (7) – reverse feedbacksfrom incomes and institutions, respectively – are of minor importance. Research in this area includes Frankel and Romer,and Sachs and Warner.27
Diamond (1997); Gallup / Sachs / Mellinger (1998); Sachs (2001).Frankel / Romer (1999); Sachs / Warner (1995).
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Fritz BreussIncome levelgrowth
endogenous
(4)
(7)
(8)(5)
Integrationopenness
(1)
(9)
Institutionsrule of law
(6)
(2)(3)exogenous
Geographyclimate,resources
Figure 3: What accounts for the income difference between therichest and the poorest nations?Source: Rodrik / Subramanian / Trebbi (2002), 24.
Institutionalists: This group of explanations centres on institutions, and in particular the role of property rights and the ruleof law. According to them, what matters are the rules of thegame in a society and their conductiveness to desirable economic behaviour. They have to worry about different kinds ofreverse causality. They have to show that improvements inproperty rights, the rule of law and other aspects of the institutional environment are an independent determinant of incomes(arrow [8] in Figure 3), and are not simply the consequences ofhigher incomes (arrow [9]) or of greater integration (arrow[5]). This view is associated primarily with North. It has received careful econometric treatment by Hall and Jones, whofocus on what they call ‘social infrastructure’, and by Acemoglu, Johnson and Robinson, who focus on the expropriationrisk that current and potential investors face.28Growth theory has traditionally focused on physical and human capital accumulation, and, in its endogenous growth variant,on technological change. But long-term economic development is avery complex phenomenon, which cannot easily be explained byany one of the above determinants. Therefore Rodrik, in line with
3.
28
North (1990); Hall / Jones (1999); Acemoglu / Johnson / Robinson(2001).
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historians and many social scientists prefers nuanced, layered explanations of centuries of economic history, where the factors of thethree schools interact with human choices and many other not-sosimple twists and turns of fate.29As is indicated in Figure 3, the extent to which an economy isintegrated with the rest of the world and the quality of its institutions are both endogenous, shaped potentially not just by each otherand by geography, but also by income levels. Problems of endogeneity and reverse causality plague any empirical researcher trying tomake sense of the relationships among these factors.Rodrik, Subramanian and Trebbi estimate the following equa30tion:log yi P  DINS i  EINTi  JGEOi  H i(1)where yi is income per capita (in Purchasing-Power-Parity in US$,PPP GDP, in 1995) in country i, INSi, INTi, and GEOi are respectively measures for institutions,31 integration (measured by openness = ratio of nominal imports plus exports to GDP), and geography (distance from equator of capital city), and İi is the randomerror term. The authors are interested in the size, sign, and significance of the three coefficients D, E, and J. Three country samplesare used, one with 64, one with 80, and one with 140 countries.First, there is a clear and unambiguously positive relationshipbetween income and its possible three determinants. Also the OLS(one stage least-square) estimation of equation (1) results in thecorrect (positive) sings for all three indicators – institutions, openness, and geography. This suggests that countries with strongerinstitutions, more open economies, and more distant from theequator (measure of geography) are likely to have higher levels ofincome. However, if one takes into account the possibility of reverse causality, omitted variables bias, and measurement errors,equation (1) cannot be interpreted as causal or accurate. To addressthese problems, the authors employ a two-stage least squares estimation procedure, using instruments to determine the variables INSiand INTi, respectively. As a result, once the institutional variable isadded, geography and openness do not have any additional power293031
Rodrik (2003b).Rodrik / Subramanian / Trebbi (2002), 6.Institutional quality measure by Kaufman / Kraay / Zoido-Lobaton(2002).
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in explaining growth and hence development. Institutions trumpgeography and openness. The importance of institution building fordevelopment is also stressed by the World Bank.32B. Is WTO Membership Good for Trade at All?In provocative papers, Rose asserts that WTO membership does notstimulate trade. He estimates the effect on international trade ofmultilateral trade agreements: the World Trade Organization(WTO), its predecessor the General Agreement on Tariffs andTrade (GATT), and the Generalized System of Preferences (GSP)extended from rich countries to developing countries. He uses astandard ‘gravity’ model of bilateral merchandise trade and a largepanel data set covering over fifty years and 175 countries. An extensive search reveals little evidence that countries joining or belonging to the GATT/WTO have very different trade patterns thanoutsiders. The GSP does seem to have a strong effect, and is associated with an approximate doubling of trade.33To estimate the effects of international institutions on trade,Rose uses the following specification of the gravity model:34ln( X ij ) t E 0  E1 ln Dij  E 2 ln(YiY j ) t  E 3 ln(YiY j / Popi Pop j ) t  E 4 Lang ij  E 5 ( FTAij ) t 
 E 6 (CU ij ) t  E 7 (GSPij ) t  E 8 (WTOij ) t  E 9 ( IMFij ) t  E10 (OECDij ) t  Dummies  H ijt
(2)
where i and j and denote trading partners, t denotes time, and thevariables are defined as follows: Xij denotes the average value ofreal bilateral trade between countries i and j; Y is real GDP; Pop ispopulation; D is the distance between i and j; Lang is a binary‘dummy’ variable which is unity if i and j have a common languageand zero otherwise; FTA is a binary variable which is unity if i and jboth belong to the same regional trade agreement (e.g. EU countries); CU is a binary variable which is unity if i and j use the samecurrency (‘currency union’) at t; GSP is a binary variable which isunity if i extended a GSP concession to j at t or vice versa; WTO isa binary variable which is unity if i and j are GATT/WTO membersat t; IMF is a binary variable which is unity if i and j are IMF members at t; OECD is a binary variable which is unity if i and j are323334
World Bank (2002), chapter 3.Rose (2003); Rose (2004).Rose (2003), 5-6.
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OECD members at t; Dummies represent all the additional variablesused in the gravity model, such as sharing a land border, landlockedcountries, islands, area of countries in square kilometres, colonycountries, colonizer countries, fixed effects etc.; İij represents theomitted other influences on bilateral trade.Rose finds the following benchmark results (OLS estimation;using other estimation techniques the key results remain quite robust): Distance (in the geographic, linguistic, monetary, and historical senses) reduces trade, while greater economic ‘mass’ (real GDPand/or GDP per capita) expands it. The effects are economicallyand statistically significant.35 The coefficients of interest concernthe effects of membership in international organizations; what dothey reveal? There are two surprises; one negative and one positive.The negative surprise is that membership in neither theGATT/WTO nor the IMF is associated with deeper trade. Indeed,the point estimates for all four coefficients (both or one of thecountries being in the GATT/WTO or IMF) are negative. The othersurprise is the effect of OECD membership on trade that appears tobe strong and positive. The estimations suggest