The impact of global institutionalization within the WTO on foreign trade flows, the case of Ukraine

Abstract

Since the establishment of the World Trade Organization (WTO) as the main institutionalizing force in the trade area more than 20 years ago, developing countries have sought to gain special recognition and treatment within the multilateral system in order to solve their structural and systemic problems.However, the impact of global institutionalization within the WTO on member-countries’ foreign trade remains debatable. The subject of research of the article is the impact of global institutionalization within the WTO on Ukraine’s foreign trade flows. The objective is to evaluate the impact the global institutionalization within the WTO has on the foreign trade of Ukraine and develop a roadmap for national institutional environment improvement. The main method used is gravity modelling.Heritage Foundation’s Index of Economic Freedom, World Economic Forum’s Index of Global Competitiveness and World Bank’s world gavernance indicators are used separately in constructed models as institutional variables. All the models also include dummy variables, which indicate WTO – or RTA-membership of two countries. The sample includes all the countries, which have been trade partners of Ukraine during last 20 years. The following results were obtained:6 gravity models areconstructed, which allowes to calculate the possible percentage of Ukraine’s exports increase due to the enhancement of Ukraine’s institutional variables to theaverage European level and develop a roadmap for national institutional framework improvement. Conclusions: the calculated percentage of increase proves that the global institutionalization within the WTO may have a a positive impact on Ukraine’s foreign trade flows, gravitaty modelling helps in determining how Ukraine’s national institutional framework can be improved.