A World Trading System for the Twenty-First Century

I explore whether the world trading system of the twentieth century can be adapted to address the challenges of the twenty-first. I first develop an understanding of how GATT functioned during the twentieth century, and which features of the economic environment were most important in determining its success. I then examine a list of changes in the global economy that are sometimes identified as warranting changes in the design of the GATT/WTO. I argue that the "terms-of-trade" theory of trade agreements provides a compelling framework for understanding the impact of GATT in the twentieth century, and I show that when viewed through this lens, the rationale for GATT’s design features transcend many, though not all, of the current challenges facing the WTO. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.