(When) Does Tit-for-Tat Diplomay in Trade Policy Pay Off?
AbstractIn international relations, short-run incentives for non-cooperation often dominate. Yet, (external) institutions for enforcing cooperation are hampered by national sovereignty, supposedly strengthening the role of selfenforcing mechanisms. This paper examines their scope with a focus on contingent protection aka tit-for-tat in trade policy. By highlighting various strategies in a (linear) partial-equilibrium framework, we show that retaliation of noncooperative behavior by limiting market access works as a disciplining device independently of supply and demand parameters. Our theoretical results are backed by empirical evidence that countries more frequently involved in WTO-mediated disputes entailing tit-for-tat strategies pursue on average more liberal trade regimes.
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Bibliographic InfoPaper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number 116/2012.
Length: 48 pages
Date of creation: 26 Mar 2012
Date of revision:
Int. Political Economy; Trade Policy Conflicts; Tit-for-Tat; WTO Dispute Settlement;
Other versions of this item:
- Barbara Dluhosch & Daniel Horgos, 2013. "(When) Does Tit-for-tat Diplomacy in Trade Policy Pay Off?," The World Economy, Wiley Blackwell, vol. 36(2), pages 155-179, 02.
- Barbara Dluhosch & Daniel Horgos, 2012. "(When) Does Tit-for-Tat Diplomacy in Trade Policy Pay Off?," FIW Working Paper series 085, FIW.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F51 - International Economics - - International Relations and International Political Economy - - - International Conflicts; Negotiations; Sanctions
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
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