CONFLICTS AND DELAYS IN INTERNATIONAL TRADE AGREEMENTS

Motivated by the current delay in WTO negotiations, we consider a model of a bilateral trade agreement in the presence of asymmetric cross-border externalities. In this model, we show that both countries conflict in their preferred set of policy agendas and thus have incentives to delay their negotiations. We also find that the extent of delay depends on the level of transfer between them. These results imply an importance of bilateral compensation scheme between developing and developed countries in the current WTO negotiations so as to reduce the delays.