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The Politics of WTO Enforcement Mechanism

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  • Pao-Li Chang

    ()
    (School of Economics and Social Sciences, Singapore Management University)

Abstract

This paper attempts to develop a formal economic framework to analyze the influences of domestic political considerations by democratic governments in shaping the WTO enforcement outcomes in the wake of a violation ruling against the defendant. Since a different mix of import and export sectors in the defendant and complainant country will benefit from the various potential enforcement outcomes, they become competing forces which steer the strategic interactions between the disputing governments. The results of the paper illustrate the complainant’s strategy in selecting the retaliation list, and the likelihood of the defendant’s compliance or compensation in response to the proposed or foreseeable retaliation, given the political and economic environments on both sides of the disputing parties. This paper also captures the possibility of enforcement failures under the current WTO dispute settlement procedure, where the complainant does not have enough retaliation capacity to induce compliance or some form of compensation from the defendant.

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Bibliographic Info

Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 04-2004.

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Length: 31 pages
Date of creation: Jan 2004
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:04-2004

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Keywords: trade sanction; enforcement failure; compliance; compensation; political economy;

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References

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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  2. Butler, M. & Hauser, H., 2000. "The WTO Dispute Settlement System: A First Assessment from an Economic Perspective," Discussion Paper 2000-21, Tilburg University, Center for Economic Research.
  3. Ludema, R.D., 1990. "Optimal International Trade Agreements And Dispute Settlement Procedures," UWO Department of Economics Working Papers 9101, University of Western Ontario, Department of Economics.
  4. Pao-li Chang, 2007. "The Evolution and Utilization of the GATT/WTO Dispute Settlement Mechanism," Trade Working Papers 22062, East Asian Bureau of Economic Research.
  5. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
  6. Anderson, Kym, 2002. "Peculiarities of Retaliation in WTO Dispute Settlement," CEPR Discussion Papers 3578, C.E.P.R. Discussion Papers.
  7. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
  8. Wilfred J. Ethier, . "Punishment and Dispute Settlement in Trade Agreements," EPRU Working Paper Series 01-14, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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