Abstract

for helpful comments. This paper was written while Staiger was a Fellow at the Center for Advanced Study in the Behavioral Sciences. Staiger is also grateful for financial support provided by the Despite the important role played by GATT in the world economy, economists have not developed a unified theoretical framework that interprets and evaluates the principles that form the foundation of GATT. Our purpose here is to propose such a framework. Working within a general equilibrium trade model, we represent government preferences with a very general formulation that includes the traditional case in which governments maximize national income as well as the possibility emphasized in leading political-economy models that governments are concerned with the distributional implications of their tariff choices. Using this general framework we establish that GATT's principles of reciprocity and nondiscrimination (MFN) can be viewed as simple rules that assist governments in their effort to implement efficient trade agreements. From this perspective, we argue that The central role played by GATT in shaping post-war trade policy is widely accepted. Through the eight rounds of trade negotiations that have followed since the inception of GATT in