Introduction

In a fundamental sense, the answer to the question in the title of this paper is doubtless negative. But an adequate analysis of why this is so and what might be done about it is impossible without asking another question: are developing countries doing enough for themselves in the WTO? The assigned title of the paper implicitly assumes that the contribution of the WTO to developing countries – whether negative or positive – is in the hands of others. The additional question posed here presupposes that developing countries can also influence the contribution that the WTO makes to their growth and development. Both questions inform the analysis in this paper.

Some commentators and writers on developing country issues in the WTO tend toward the misleading assumption that developing countries can be treated as a homogeneous group. It has become increasingly obvious that important differences in interests and priorities exist among developing country WTO Members. This maybe less true for the least-developed country (LDC) group, identified on the basis of a series of economic and social indicators by the United Nations. But even among LDCs, priorities are not always the same. Some have suggested that emphasizing differences among developing countries is a modern variant of a divide-and-rule strategy. But in reality developing countries are very different in fundamental ways, which is bound to be reflected in their priorities and interests. Developed countries will not agree to uniform policy treatment for all developing countries in the system, and many developing countries have the same reservations.

ABSTRACT

With the advent of the TRIPS Agreement, international disputes about governmental regulation of intellectual property rights (IPRs) are now subject to adjudication within the WTO dispute resolution mechanism. The standard model used by economists to explain dispute settlement procedures is misleading, for the process is not about preventing countries from exercising market power. Rather, the system is designed to resolve political market failures arising within countries that would be harmful to market access for foreign firms. These issues arise particularly in the context of intellectual property rights (IPRs), which may be used as cross-market bargaining chips. This possibility is illustrated by the petition of Ecuador to suspend concessions in this area for European firms in the context of the EU – Banana case. The scope of such an approach remains unclear, and there are many fundamental questions deserving close analysis. In this chapter, I make several basic points relating to the economics of IPRs and to the World Trade Organization's (WTO) dispute settlement process. These comments underscore the fact that the injection of IPRs into the global trading system raises a new dimension for settling disputes.

The economist's conventional view of trade agreements

The prevalent view among international trade theorists is that trade agreements exist to deal with terms-of-trade externalities between countries. Specifically, when such large nations or aggregations as the United States and the European Union implement business standards or undertake regulatory actions, they may have the secondary effect of restricting trade and worsening market-access opportunities for exporting countries.

Introduction

Great papers come in two flavours. Some are idea-papers, providing new and fruitful ways to look at the world. Others are tool-papers, giving us new and useful techniques or models with which to exploit the ideas. Dixit–Stiglitz (1977) is a truly great tool-paper.

The basic idea of monopolistic competition had been around for decades. Everyone (almost) knew that it was very important, so important that it had become standard fare in undergraduate microeconomics courses at even the most introductory level. So important that it was usually not mentioned at all in graduate theory courses. No one had been able to express the idea in a formal model that could both endow the theory with professional respectability and also apply it to significant problems in a professional way. As a result it was widely regarded as an idea – inherently important though it might be – that had simply not proven to be useful. Any professor iconoclastic enough to discuss monopolistic competition in his or her graduate course would be ignored by students preoccupied with mastering the formal models crucial to passing qualifying examinations and to gaining future employment. Graduate students typically learned about monopolistic competition only when they became teaching assistants for the first undergraduate course and so were forced to learn about it; those graduate students fortunate enough to get by on fellowships often never encountered the concept at all.

This volume has two interrelated purposes: to present a selection of important contemporary work in international trade theory at the beginning of the 1990s, and to honor Ronald Jones, one of the leading post-war figures in international economics. Although Jones is still as active and innovative a researcher as ever, his sixtieth birthday in 1991 provided an opportunity to assess and honor his contributions. With this in mind, a conference was organized at the University of Pennsylvania in November 1990, at which drafts of the papers in this volume were presented. The result, we hope, is a collection of papers which shows both the continuing influence of Jones's work and the increasing diversity and maturity of international trade theory.

Chapter 2, by Wilfred Ethier, attempts to assess Ronald Jones's contributions to international trade theory, while the remainder of the book contains representative work from the frontier of the field. The remainder of the present chapter introduces the subsequent contributions and attempts to place them in context. We have arranged them so that they form a natural progression, starting in Part II with the spatial and historical context of international trade and moving through positive and normative issues in static models of trade (in Parts III and IV respectively) to work on dynamics and growth in Part V.

In chapter 3 Paul Krugman continues his recent work on geography and trade. Whereas previously he developed a theory of industrial specialization based on agglomeration effects in production and a regional dispersion of demand, here he builds a theory of industrial specialization based on agglomeration and transportation “hubs.” The main idea is that transport costs differ across pairs of countries and regions.

Ronald Jones enters his sixties as productive as ever. This renders a summary evaluation of his contribution impossible: not only is that contribution apparently far from complete, but any judgment today about an accomplishment yesterday might well be nullified by a superseding accomplishment tomorrow. So I attempt no retrospective overview. A collection of article-by-article comments is likewise impractical. Instead I indulge myself with a subjective selection of some of his more important earlier contributions, which offer the most hope for a mature perspective, and which together suggest the nature of the larger body of work.

Trade theory has always been “model oriented.” Indeed, for about half a century debate over which was the “best” model preoccupied a substantial portion of theoretical activity. Even today trade theorists can be usefully classified by their attitudes toward modelling. One group stresses the advantages of consistent application of a single theoretical structure to diverse issues. At the other extreme are those who emphasize basic ideas while giving little emphasis to the framework (s) in which those ideas are exploited. A third group emphasizes models rather than ideas but allows the choice of model to vary with the task at hand. Jones clearly belongs to this third group. Therefore it is convenient to approach his work by using choice of model as an organizational principle (but not the exclusive principle). This is not to say that his papers have been driven by a concern for model structure at the expense of economic issues. They are, in fact, typically driven by economic issues, but the hard work of choosing the appropriate model has been done before the paper has been written.