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Enforcement, Private Political Pressure and the Gatt/Wto Escape Clause

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  • Kyle Bagwell

    ()
    (Columbia University - Department of Economics)

  • Robert W. Staiger

    ()
    (University of Wisconsin - Madison - Department of Economics)

Abstract

We consider the design and implementation of international trade agreements when: (i) negotiations are undertaken and commitments made in the presence of uncertainty about future political pressures; (ii) governments possess private information about political pressures at the time that the agreement is actually implemented; and (iii) negotiated commitments can be implemented only if they are self-enforcing. We thus consider the design of self-enforcing trade agreements among governments that acquire private information over time. In this context, we provide equilibrium interpretations of GATT/WTO negotiations regarding upper bounds on applied tariffs and GATT/WTO escape clauses. We also provide a novel interpretation of a feature of the WTO Safeguard Agreement, under which escape clause actions cannot be re-imposed in an industry for a period equal to the duration of the most recent escape clause action. We find that a dynamic usage constraint of this kind can raise the expected welfare of negotiating governments.

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Bibliographic Info

Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0405-13.

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Length: 52 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:clu:wpaper:0405-13

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References

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  1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
  2. Bagwell Kyle & Staiger Robert W., 2003. "Protection and the Business Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-45, September.
  3. Kyle Bagwell, 2004. "Collusion and Price Rigidity," Theory workshop papers 658612000000000081, UCLA Department of Economics.
  4. Rosendorff, B. Peter & Milner, Helen V., 2001. "The Optimal Design of International Trade Institutions: Uncertainty and Escape," International Organization, Cambridge University Press, vol. 55(04), pages 829-857, September.
  5. Susan Athey & Kyle Bagwell, 1999. "Optimal Collusion with Private Information," Working papers 99-17, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Maggi, G & Rodriguez-Clare, A, 1996. "The Value of Trade Agreements in the Presence of Political Pressures," Papers 180, Princeton, Woodrow Wilson School - Public and International Affairs.
  7. Kyle Bagwell & Robert W. Staiger, 1997. "Reciprocity, Non-discrimination and Preferential Agreements in the Multilateral Trading System," NBER Working Papers 5932, National Bureau of Economic Research, Inc.
  8. Baldwin, Richard, 1987. "Politically realistic objective functions and trade policy PROFs and tariffs," Economics Letters, Elsevier, vol. 24(3), pages 287-290.
  9. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-37, December.
  10. Robert C. Feenstra & Tracy R. Lewis, 1987. "Negotiated Trade Restrictions with Private Political Pressure," NBER Working Papers 2374, National Bureau of Economic Research, Inc.
  11. R. W. Staiger & G. Tabellini, 1999. "Do Gatt Rules Help Governments Make Domestic Commitments?," Economics and Politics, Wiley Blackwell, vol. 11(2), pages 109-144, 07.
  12. Bagwell, Kyle & Staiger, Robert W, 1990. "A Theory of Managed Trade," American Economic Review, American Economic Association, vol. 80(4), pages 779-95, September.
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Cited by:
  1. Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. "Trade Agreements as Endogenously Incomplete Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 394-419, March.
  2. MARTIN, Alberto & VERGOTE, Wouter, 2007. "On the role of retaliation in trade agreements," CORE Discussion Papers 2007089, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Chad P. Bown, 2005. "Trade Remedies and World Trade Organization Dispute Settlement: Why Are So Few Challenged?," The Journal of Legal Studies, University of Chicago Press, vol. 34(2), pages 515-555, 06.
  4. Giovanni Maggi & Andres Rodriguez-Clare, 2005. "A Political-Economy Theory of Trade Agreements," NBER Working Papers 11716, National Bureau of Economic Research, Inc.

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