Title: The Role of MFN in WTO Accession
Reference Number: 1083
Publication Date: August 2003
JEL Classifcation: F1, C7
Author(s):

Eric W. Bond
Pennsylvania State University

Stephen Ching
The University of Hong Kong

Edwin L.C. Lai
City University of Hong Kong

Abstract:
We analyze the role played by the most favored nation (MFN) principle in accession negotiations in the WTO. We make use of a model with three countries trading in three goods. Two countries of similar size are existing members of WTO and the third country applies to join it. To capture the existing WTO accession procedure, we assume there to be a series of bilaterial sequential bargaining. We found that not only does the applicant gain a higher share of the total surplus than the existing members, its absolute gain is also higher under MFN. Even when compared with multilateral Nash bargaining, bilateral sequential bargaining with MFN favors the applicant both relatively and absolutely. The result can be easily extended to an N-country case.

Key words: WTO, accession, most favored nation (MFN)

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Last modified: 04/14/2004