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European Integration in a Global Economy

European Integration in a Global Economy

CESEE and the Impact of China and Russia

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

The expert contributors focus on global imbalances and accompanying policy challenges, competitiveness and trade, the sustainability of current growth strategies, and banking and financial stability in the light of the global economic and financial crisis. They provide a multi-disciplinary assessment, combining the views of high-ranking central bankers, policymakers, commercial bankers and academics, and demonstrate that a broad view of European economic integration is crucial given that spillovers and contagion were major issues of the recent economic crisis.

Chapter 8: Why do trade negotiations take so long?

Christoph Moser and Andrew K. Rose

Subjects: economics and finance, international economics, money and banking


There is widespread agreement among economists that trade liberalization is best conducted at the multilateral level. Indeed, facilitating multilateral negotiations is one of the primary objectives of the World Trade Organization (WTO), as it was with its predecessor the General Agreement on Tariff s and Trade (GATT). By way of contrast, regional trade agreements (RTAs) may create some trade, but they also have the potential to harmfully divert it. Still, the global approach to multilateral trade liberalization seems moribund. The Doha Round sponsored by the WTO ‘celebrated’ its tenth birthday in 2011, with no end in sight. Table 8.1 shows that the duration of GATT/WTO trade liberalization rounds – the length of time between the start of negotiations and their completion – has grown consistently with the number of participants. The 23 participants of the first (Geneva) round of GATT negotiations took only six months to conclude a deal that reduced 45 000 tariff s. But there are now over 150 members of the WTO, a number that makes negotiations considerably more difficult. Moreover, membership in the WTO has continued to grow since the completion of the last (Uruguay) round, notably with the accession of countries like China (in late 2001) and the approval of Russia’s WTO membership (in 2011). It may be problematic to generalize from the small number of observations on the duration of global (GATT/WTO) rounds of trade talks. Still, we have a large number of observations on regional trade negotiations. Since those are likely to be similar in nature to their GATT/WTO analogues, we study the determinants of the duration of RTA negotiations in this chapter. We are motivated by the question: what effect does the complexity of trade negotiations have on the duration of those negotiations? We proxy complexity with two measures: (a) the number of countries participating in the negotiation; and (b) the regional diversity of those countries. We find that negotiations do indeed take significantly longer when they involve more countries, especially if the countries are spread across different regions. Thus it seems reasonable to us that one appeal of RTAs is the fact that they represent a feasible, if imperfect, route to greater trade integration. While all this is economically sensible, it still leaves us feeling depressed about the feasibility of the current Doha and future WTO rounds.

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