Assessing The Functioning Of The Trade Policy Review Mechanism Of The World Trade Organization

Adherence to agreed rules and the provision of accurate information are of crucial importance for free trade. The Trade Policy Review Mechanism (TPRM) of the World Trade Organization (WTO) is one of the major sources of this kind of information. Due to the organization's almost global membership and the strong position of the TPRM within the WTO system, the review mechanism is a prime example of an internationally accepted surveillance body. As a result, both academia and the creators of the TPRM saw developing countries as the main profiteers from the mechanism. In contrast to previous studies, the focus of this research lies on an assessment of the Trade Policy Reviews (TPRs) for the countries with the largest shares in world trade. Based on signalling theory, the paper tries to investigate the TPRMs influence on a country's reputation and its ability to reduce information asymmetries. For the former, the results are mixed. Even though there is evidence that countries tend to be willing to improve their reputation as trading partners, the countries under review were reluctant to adjust their policies only because of pressure from the TPRs. As far as the reduction of information asymmetries is concerned, the results are more positive. The increasing and continued questioning about certain policies tends to close existing information gaps and even seems to cause countries to provide more extensive information.