Discrimination in international trade: A different perspective

Abstract

Discrimination is generally conceived of as a feature of protectionism and the source of retaliatory spirals. In this paper, I argue that this perspective on trade discrimination is conceptually and empirically deficient. The extent of discrimination is almost exclusively considered with respect to the form of cooperation, that is, the number of countries that cooperate. This view disregards the fact that the bargaining approach also determines the extent to which a country can discriminate in concession-making. By neglecting the bargaining method, the existing literature tends to underestimate the prevalence of discriminatory treatment in international trade and in periods of liberalization in particular. Furthermore, a case study of the government procurement negotiations at the Uruguay Round shows that discrimination between countries and items may go along with and actually promote liberalization. On the basis of these insights, I make a first step toward a better understanding of discrimination by developing a baseline model explaining liberalization through discrimination.