GEP Research Paper 01/32
The Role of the WTO in the Transfer of Policy Knowledge on Trade and Competition
O. Morrissey and D. Nelson
Abstract
This paper uses theories of policy learning and of policy-making to examine how global institutions such as the WTO can influence policy choices. In pure learning by doing, policy choices are based on information relating to the history of an active policy; there is no information on alternative policies. New information on priors provides an incentive to choose a different policy. In the case of social learning, policy-makers can observe the policies chosen by other actors, but the signals those other actors receive is unobserved. External agents (global institutions of knowledge transfer) can influence policy choice by altering priors, providing technical advice or providing information on the (unobserved) effects of the policy choices of others. If the aim is to promote competition, institutions should also show awareness of the global competition environment. Many policies are advocated on the implicit assumption of competitive markets. This gives a false impression of the state of nature, and increases the probability that the effect of reforms will be less beneficial than predicted. If so, the reputation of the WTO as a 'purveyor of global policy knowledge' may be undermined.
Issued in November 2001.
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