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Why are safeguards needed in a trade agreement?

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  • Meredith Crowley

Abstract

This paper reviews the theoretical and empirical literature on the use of safeguards in a trade agreement. It then analyzes the available data on the use of safeguards by WTO members to examine two hypotheses in the economics literature, that safeguards improve welfare by facilitating tariff reductions and that safeguards improve welfare by providing insurance against adverse economic shocks. I find that countries which undertook larger tariff reductions during the Uruguay Round conducted more safeguards investigations after the WTO was established. However, this result is not robust across all specifications of the model and should not be regarded as definitive. I find no evidence to support the hypothesis that safeguards improve welfare by providing insurance. The empirical analysis rejects the hypothesis of a relationship between safeguards and aggregate uncertainty.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-06-06.

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Date of creation: 2006
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Handle: RePEc:fip:fedhwp:wp-06-06

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Keywords: General Agreement on Tariffs and Trade (Organization) ; Trade;

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References

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  1. Miyagiwa, Kaz & Ohno, Yuka, 1995. "Closing the Technology Gap under Protection," American Economic Review, American Economic Association, vol. 85(4), pages 755-70, September.
  2. 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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  14. repec:att:wimass:9413 is not listed on IDEAS
  15. Robert Staiger & Frank Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," International Trade 9410004, EconWPA.
  16. Ronald D. Fischer & Thomas J. Prusa, 2003. "WTO Exceptions as Insurance," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 745-757, November.
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  18. Joost Pauwelyn, 2004. "The Puzzle Of Wto Safeguards And Regional Trade Agreements," Journal of International Economic Law, Oxford University Press, vol. 7(1), pages 109-142, March.
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