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The GATT and Gradualism

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  • Ben Zissimos
  • Ben Lockwood

Abstract

This paper shows how the institutional rules imposed on its signatories by the GATT created a strategic incentive for countries to liberalize gradually. Free trade can never be achieved if punishment for deviation from a trade agreement is limited to a 'withdrawal of equivalent concessions.' Trade liberalization must be gradual if, in addition, deviation from an agreement is limited. The paper shows how (sufficiently patient) countries may have an incentive to deviate in a limited way when operating under GATT dispute settlement procedures

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File URL: http://repec.org/esNASM04/up.6995.1075611734.pdf
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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 607.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:607

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Keywords: Nash tariffs; Free Trade; Gradualism; Trade agreement;

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References

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  5. Staiger, R.W., 1994. "A Theory of Gradual Trade Liberalization," Working papers 9405, Wisconsin Madison - Social Systems.
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  14. Bagwell, Kyle & Staiger, Robert W., 2001. "Reciprocity, non-discrimination and preferential agreements in the multilateral trading system," European Journal of Political Economy, Elsevier, vol. 17(2), pages 281-325, June.
  15. van Damme,Eric, 1986. "Renegotiation-proof equilibria in repeated Prisoner`s dilemma," Discussion Paper Serie A 84, University of Bonn, Germany.
  16. Ben Lockwood & Jonathan P. Thomas, 2002. "Gradualism and Irreversibility," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 339-356.
  17. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341.
  18. Bond, Eric W & Park, Jee-Hyeong, 2002. "Gradualism in Trade Agreements with Asymmetric Countries," Review of Economic Studies, Wiley Blackwell, vol. 69(2), pages 379-406, April.
  19. Richard Chisik, 2010. "Gradualism in Free Trade Agreements: A Theoretical Justification," Working Papers 018, Ryerson University, Department of Economics.
  20. Furusawa, Taiji & Lai, Edwin L. -C., 1999. "Adjustment costs and gradual trade liberalization," Journal of International Economics, Elsevier, vol. 49(2), pages 333-361, December.
  21. McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-50, April.
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  25. Maggi, Giovanni & Rodriguez-Clare, Andres, 2005. "A Political-Economy Theory of Trade Agreements," CEPR Discussion Papers 5321, C.E.P.R. Discussion Papers.
  26. McLaren, John, 1997. "Size, Sunk Costs, and Judge Bowker's Objection to Free Trade," American Economic Review, American Economic Association, vol. 87(3), pages 400-420, June.
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  28. Farrell, Joseph & Maskin, Eric, 1987. "Renegotiation in Repeated Games," Department of Economics, Working Paper Series qt9wv3h5jb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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Citations

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Cited by:
  1. Maggi, Giovanni & Rodriguez-Clare, Andres, 2005. "A Political-Economy Theory of Trade Agreements," CEPR Discussion Papers 5321, C.E.P.R. Discussion Papers.
  2. Richard Chisik, 2010. "Limited Incremental Linking and Unlinked Trade Agreements," Working Papers 023, Ryerson University, Department of Economics.
  3. Steven A. Matthews, 2006. "Smooth Monotone Contribution Games," PIER Working Paper Archive 06-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. Carsten Kowalczyk & Raymond Riezman, 2009. "Trade Agreements," CESifo Working Paper Series 2660, CESifo Group Munich.
  5. Itai Agur, 2007. "The US Trade Deficit, the Decline of the WTO and the Rise of Regionalism," Economics Working Papers ECO2007/17, European University Institute.
  6. Ben Zissimos, 2006. "The GATT and Gradualism," Vanderbilt University Department of Economics Working Papers 0619, Vanderbilt University Department of Economics.
  7. Richard Baldwin, 2007. "Multilateralising Regionalism: Sphagetti Bowls as building Blocs on the Path to Global Free Trade," Working Papers id:1231, eSocialSciences.
  8. Emanuel Ornelas, 2012. "Preferential Trade Agreements and the Labor Market," CEP Discussion Papers dp1117, Centre for Economic Performance, LSE.

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