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The GATT and Gradualism

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  • Ben Zissimos

    ()
    (Department of Economics, Vanderbilt University)

Abstract

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

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File URL: http://www.accessecon.com/pubs/VUECON/vu06-w19.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0619.

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Date of creation: Aug 2006
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Handle: RePEc:van:wpaper:0619

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Free trade; gradual trade liberalization; strategic interactions; trade agreement; welfare;

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References

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  1. Kyle Bagwell & Robert W. Staiger, 1988. "A Theory of Managed Trade," NBER Working Papers 2756, National Bureau of Economic Research, Inc.
  2. 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.
  3. Staiger, Robert W., 1995. "International rules and institutions for trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551 Elsevier.
  4. Bond, Eric W. & Syropoulos, Constantinos & Winters, L. Alan, 2001. "Deepening of regional integration and multilateral trade agreements," Journal of International Economics, Elsevier, vol. 53(2), pages 335-361, April.
  5. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
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  7. Lockwood, B. & Wong, K.Y., 1996. "Specific and Ad Valorem Tariffs Are Not Equivalent in Trade Wars," Discussion Papers 9602, Exeter University, Department of Economics.
  8. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
  9. 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.
  10. 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, December.
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  15. Syropoulos, Constantinos, 2002. "Optimum Tariffs and Retaliation Revisited: How Country Size Matters," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 707-27, July.
  16. repec:att:wimass:9405 is not listed on IDEAS
  17. Ben Zissimos, 2006. "The GATT and Gradualism," Vanderbilt University Department of Economics Working Papers 0619, Vanderbilt University Department of Economics.
  18. Giovanni Maggi & Andres Rodriguez-Clare, 2005. "A Political-Economy Theory of Trade Agreements," NBER Working Papers 11716, National Bureau of Economic Research, Inc.
  19. Kyle Bagwell & Robert W. Staiger, 1996. "Reciprocal Trade Liberalization," Discussion Papers 1150, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  24. Bond, Eric W. & Riezman, Raymond G. & Syropoulos, Constantinos, 2004. "A strategic and welfare theoretic analysis of free trade areas," Journal of International Economics, Elsevier, vol. 64(1), pages 1-27, October.
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  26. van Damme, Eric, 1989. "Renegotiation-proof equilibria in repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 47(1), pages 206-217, February.
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  28. Damme, E.E.C. van, 1989. "Renegotiation-proof equilibria in repeated prisoners' dilemma," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154423, Tilburg University.
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Citations

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Cited by:
  1. Richard Baldwin, 2006. "Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade," NBER Working Papers 12545, National Bureau of Economic Research, Inc.
  2. Carsten Kowalczyk & Raymond Riezman, 2009. "Trade Agreements," CESifo Working Paper Series 2660, CESifo Group Munich.
  3. Ben Zissimos & Ben Lockwood, 2004. "The GATT and Gradualism," Econometric Society 2004 North American Summer Meetings 607, Econometric Society.
  4. Agur Itai, 2008. "The US Trade Deficit, the Decline of the WTO and the Rise of Regionalism," Global Economy Journal, De Gruyter, vol. 8(3), pages 1-34, September.
  5. Richard Chisik, 2010. "Limited Incremental Linking and Unlinked Trade Agreements," Working Papers 023, Ryerson University, Department of Economics.
  6. Giovanni Maggi & Andrés Rodríguez-Clare, 2007. "A Political-Economy Theory of Trade Agreements," American Economic Review, American Economic Association, vol. 97(4), pages 1374-1406, September.
  7. Emanuel Ornelas, 2012. "Preferential Trade Agreements and the Labor Market," CEP Discussion Papers dp1117, Centre for Economic Performance, LSE.
  8. 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.

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