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Are market access commitments on services in Preferential Trade Agreements (PTAs) reciprocal or simply unilateral? If reciprocal, do concessions granted in services depend on concessions received from the trading partner in other services or in non-services areas as well? In this paper we investigate the presence of reciprocity in bilateral services agreements, by sub-sector, mode of supply and type of agreement (North-North, South-North, South-South). To do so, we use a database of concessions given and received by 36 WTO Members in 40 services PTAs. Results reveal the presence of reciprocity at the product (sub-sector) level and across economic sectors (i.e., preferences in services trade in exchange for preferences received in goods trade). Reciprocity is stronger in agreements between developed countries. The findings provide insights into motivations for services PTAs, but also the multilateral negotiations. Indeed, the negotiation of services PTAs provides an incentive to withhold services offers in the Doha Round in order to extract more - reciprocal- concessions at a bilateral level. The existence of reciprocity on a sectoral basis may also hold lessons on optimal ways to improve the multilateral negotiating process.

Special and differential treatment (S&D) for developing countries continues to be a defining feature of the multilateral trading system. This paper seeks to address key aspects of what has become an increasingly entangled and multi-faceted discussion. The paper begins by reviewing the historical context in which the relationship of developing countries with the multilateral trading system evolved. The paper distinguishes several elements in the case typically made for S&D. It argues that concerns about graduation — the definition of which countries qualify for special treatment —have complicated progress on this issue, suggesting that a focus on measures rather than on country status would obviate this difficulty, while at the same time increasing the analytical underpinning of the case for special and differential treatment. The paper explores various forms of S&D and develops arguments for particular approaches to the design and management of access to S&D. An illustration is provided of how a more analytical approach would work by defining eligibility automatically in relation to measures rather than countries.

Management of capital inflows has unexpectedly become a major challenge in transition economies. These countries were expected to have an insatiable demand for foreign capital, and an excess demand for capital inflows was, therefore, predicted by most observers. Foreign investors are also known to be very selective in their choice of markets, and these countries were a big unknown. Moreover, macroeconomic policy in these countries has been dominated by the objective of disinflation. We explain in this paper the reasons why some transition countries have been an attractive market for foreign investors and how important has foreign capital been for these countries. But the bulk of the paper provides an assessment of government policies to manage foreign capital inflows. We evaluate the policies against the background of different government objectives and in terms of the actual policy instruments used by the monetary authorities, the timing and sequencing and the costs of these interventions. We argue that the initial responses to capital surges were poor; the authorities were reluctant to adjust their original policies and learn from the experiences elsewhere. Eventually, their policy responses were changed but until the costs of inertia became too high. The authorities have effectively used sterilization policies, more flexible exchange rate policies combined with tight monetary and fiscal policies. They also understood that an effective management of capital flows must start from well functioning markets, and have been prepared to adopt structural policies whenever market imperfections could be identified.

The customs union between the European Union (EU) and Turkey, which entered into force in January 1996, extended and deepened the Association Agreement, signed in 1964 and which foreshadows full EU membership for Turkey. In a number of areas, the new relationship goes beyond the minimum requirements for a customs union: Turkey is also having to implement a number of measures which are part of the acquis communautaire, similar to those applicable within the EU. This paper addresses the question whether this adoption of the EU model is beneficial to Turkey and third countries. The importance of this issue is the spreads of this model through the extension of the EU itself and the building of an increasing web of partnerships between the EU and other countries in Central and Eastern Europe as well as Mediterranean countries. Moreover, other regions are looking at the EU model as a way in which to deepen their own preferential trading arrangements.

Commitments in regional trade agreements (RTAs) that fall short of the same countries' obligations under the General Agreement on Trade in Services (GATS) are a relatively frequent phenomenon. However, they have gone widely unnoticed in the literature to date and drawn very little attention in relevant WTO fora either. Nevertheless, 'minus commitments' are potentially poisonous and, for various reasons, would deserve close attention. Given the broad definitional scope of the GATS, extending inter alia to commercial presence, such commitments may impinge upon the rights of third-country investors in the RTA economies. Their existence casts doubts on the legal status of the respective agreements under the GATS and can have severe implications for the trading system overall. If not complemented by comprehensive Most-favoured-Nation clauses, the RTAs concerned are disconnected from the WTO and virtually impossible to multilateralize. Based on a review of some 80,000 commitments in 66 agreements, this study seeks to develop a reasonably comprehensive picture of the frequency of 'minus commitments' and their dosage in terms of sectors, measures and modes of supply. It also discusses potential remedies from a WTO perspective.

Policy uncertainty can delay investment and reduce the response to policy change. I provide theoretical and novel quantitative evidence for these effects by focusing on trade policy, a ubiquitous but often overlooked source of uncertainty, when a firm's cost of export market entry is sunk. While an explicit purpose of the World Trade Organization (WTO) is to secure long term market access, little theoretical and empirical work analyzes the value of WTO institutions for reducing uncertainty for prospective exporters. Within a dynamic model of heterogeneous firms, I show that trade policy uncertainty will delay the entry of exporters into new markets and make them less responsive to applied tariff reductions. Policy instruments that reduce or eliminate uncertainty such as binding trade policy commitments at the WTO can increase entry even when applied protection is unchanged. I test the model using a disaggregated and detailed dataset of product level Australian imports in 2004 and 2006. I use the variation in tariffs and binding commitments across countries, products and time, to construct model-consistent measures of uncertainty. The estimates indicate that lower WTO commitments increase entry. Reducing trade policy uncertainty is at least as effective quantitatively as unilateral applied tariff reductions for Australia. These results illuminate and quantify an important new channel for trade creation in the world trade system.

WTO arbitrators rely on economics to establish the permissible retaliation limits authorized by the Dispute Settlement Understanding (DSU) which arguably serves to enforce the overall agreement. We examine how theoretical and quantitative economic analysis has and can be used in this stage of the DSU process. First, we identify, characterize, and categorize the major classes of disputes – e.g., those affecting import protection versus export promotion – and use the Bagwell and Staiger interpretation of the WTO principle of reciprocity to provide a theoretical framework that arbitrators can use to identify the maximum level of retaliatory countermeasures. Second, we allocate each of the ten DSU arbitrations that have taken place thus far into one of these categories and compare the arbitrators’ actual approach with the theory. Third, we use this framework to identify three crucial elements to the arbitrators' decisionmaking process for each case: i) the formula that they decide to adopt for identifying appropriate countermeasures, ii) their political-legal-economic decision on a WTOconsistent counterfactual to use to implement the formula, and iii) the quantitative methods they use to necessarily construct the (unobserved) WTO-consistent counterfactual. We examine not only the arbitrations that have taken place thus far, but our approach also illustrates a template for many additional types of arbitrations likely to take place under the DSU. Finally, in the disputes in which this reciprocity approach has not been used, we identify procedural difficulties that arbitrators confront thus highlighting the constraints that hinder their use of economic analysis in practice.

We estimate the effects of trade facilitation on the extensive margins of trade. Using OECD Trade Facilitation Indicators – which closely reflect the Trade Facilitation Agreement negotiated at the Bali WTO Ministerial Conference of December 2013 – we show that trade facilitation in a given exporting country is positively correlated with the number of products exported by destination and with the number of export destinations served by product. To address the issue of causality, we employ an identification strategy whereby only exports of new products, or exports to new destinations, are taken into account when computing the respective margins of trade. Our findings therefore imply a positive causal impact of trade facilitation on the extensive margins of trade. The results are, to a large extent, robust to alternative definitions of extensive margins, to different sets of controls variables and to various estimation methods. Simulating the effect of an increase to the regional or global median values of trade facilitation, we are able to quantify the potential extensive margin gains of trade facilitation reform in different regions.

Better information on how services policies vary across economies and sectors over time would improve the empirical analysis of their impact. This paper describes the Services Trade Policy Database (STPD), a joint initiative by the World Bank and the WTO Secretariat, which builds on a database developed by the World Bank nearly ten years ago and draws on a recent OECD database.

Bangladesh's international image is not as a popular tourism destination, and many people might be surprised to learn it has three World Heritage sites, including the Sundarbans tiger reserves. Moreover, it is part of important travel circuits for cultural and religious tourism, and has demonstrated potential for sports tourism. The objective of this working paper is to critically test the assertion that pro-poor "green" tourism is one of the best development options for the majority of least developed countries (LDCs) -- a challenging task in Bangladesh in the face of the country's success as an exporter of readymade garments -- by comparing tourism to the available alternatives with regard to the crucial government priorities of export diversification, employment generation and the "green economy". It is well-known that Bangladesh is under strong pressure to diversify its exports, to generate new employment (especially in rural areas), and to respond to critical environmental issues. The government has identified over 30 "thrust sectors" (including tourism) to help address these challenges, but otherwise tourism is rarely mentioned as a major trade and development option for Bangladesh. Within the limitations of data availability, this working paper reaches the conclusion that greater efforts to develop "green" tourism would be highly beneficial for facilitating rural development, environmental and cultural protection, gender equality, and export diversification in services. The most obvious current impediments are inadequate infrastructure, lack of investment and (typically election year) political conflict, but behind these factors appear to be a serious lack of stakeholder coordination, insufficient regulatory and administrative transparency and coherence, as well as some government reluctance to relinquish greater commercial autonomy in tourism to the private sector. This paper offers extensive analysis and some suggestions to help address the impediments, including the recommendation to create a Bangladesh Tourism Stakeholders Forum.