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On the Efficiency of Retaliation Rules in International Trade

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  • Victor Ginsburgh
  • Shlomo Weber

Abstract

Though retaliation to discriminatory measures taken by a trading partner are made possible by international treaties (GATT and WTO in particular), it is rarely used. We give theoretical reasons for which this has been the case. We also show that the retaliation mechanism which is built into the GATT-WTO rules prevents tariff wars, but does not necessarily lead to free trade. We provide an alternative retaliation rule which yields free trade as the unique equilibrium of the tariff game.

Suggested Citation

  • Victor Ginsburgh & Shlomo Weber, 1997. "On the Efficiency of Retaliation Rules in International Trade," Annals of Economics and Statistics, GENES, issue 47, pages 51-63.
    • Handle: RePEc:adr:anecst:y:1997:i:47:p:51-63
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    File URL: http://www.jstor.org/stable/20076082
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    1. Bhagwati, Jagdish N. & Srinivasan, T. N., 1976. "Optimal trade policy and compensation under endogenous uncertainty: The phenomenon of market disruption," Journal of International Economics, Elsevier, vol. 6(4), pages 317-336, November.
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    Cited by:

    1. Benjamin H. Liebman & Kasaundra M. Tomlin, 2008. "Safeguards and Retaliatory Threats," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 351-376, May.
    2. Benjamin Liebman & Kasaundra Tomlin, 2015. "World Trade Organization sanctions, implementation, and retaliation," Empirical Economics, Springer, vol. 48(2), pages 715-745, March.

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