The main motivation for countries to join the WTO is their conviction that WTO membership will increase trade,  help their economic development and foster economic growth. The WTO was created in 1995 based on terms  negotiated between 128 original members. Subsequently, 36 new members have acceded under individual  terms and conditions negotiated with existing members. Countries' import market power has been shown to be  a key determinant of these terms and conditions (Bagwell and Staiger, 2011; Beshkar, Bond, and Rho, 2015;  Beshkar and Lee, 2022). While GATT-WTO rounds of negotiation are seemingly static, the world is dynamic. 

As countries develop, their share of world trade in different products will inevitably change, and so will their  ability to affect world prices. This would imply that recurring rounds of trade negotiations would be helpful to  maintain commitments at mutually acceptable levels or that commitments be conditioned on some measure of  import market power. To our knowledge, we are the first to make this point in the economic policy literature,  which has important implications for how multilateral rounds or commitments should be designed, and from a  theoretical perspective, how these negotiations should be modelled.

Relying on a model by Bagwell and Staiger (2011) – arguably the most rigorous theoretical framework  explaining countries' participation in international trade agreements – we provide novel estimates on the extent  to which import market power has influenced tariff commitments for a set of original and acceded WTO  members. We make use of a new dataset of pre-Uruguay Round applied tariffs in addition to standard data  sources. Based on these estimates, we predict the commitments that might have been negotiated under  current levels of market power. We estimate that tariff cuts required to reflect current economic conditions  would amount to a reduction in annual tariff costs of up to $26.4 billion. Our results reveal substantial  heterogeneity between countries and sectors. The sectors with the largest potential tariff cost reductions are  vehicles (HS 87) and machinery and appliances (HS 84-85). Product-level reductions would range from 0 to  18.5 percentage points, with China featuring the largest average reductions.

Given the strong support in the literature for the importance of import market power in determining tariff  bindings, we further argue that continuous rounds of trade negotiations are necessary owing to shifts in market  power over time that, in part, may be endogenously determined by earlier rounds of liberalisation. Opening up  to trade changes a country's pattern of specialisation and opens up potential for structural transformation at a  pace and manner which are often difficult to predict. This implies that terms-of-trade externalities can arise in  products where tariffs were initially set at a cooperative level.