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National Treatment in the GATT

  • Henrik Horn

The National Treatment (NT) clause is the first-line defense in the GATT (and in most other trade agreements) against opportunistic exploitation of the inevitable incompleteness of the agreement. This paper examines the role of NT as it applies to internal taxation under the GATT. It is shown that despite severely restricting the freedom to set internal taxes, NT may improve government welfare, but it will not completely solve the incomplete contract problem it is meant to remedy. Furthermore, it requires a high degree of economic sophistication on behalf of trade negotiators in order for this beneficial effect to materialize.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282806776157768
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 1 (March)
Pages: 394-404

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:1:p:394-404
Note: DOI: 10.1257/000282806776157768
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References listed on IDEAS
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  1. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
  2. Kyle Bagwell & Robert W. Staiger, 1999. "Domestic Policies, National Sovereignty and International Economic Institutions," NBER Working Papers 7293, National Bureau of Economic Research, Inc.
  3. Henrik Horn, 2006. "National Treatment in the GATT," American Economic Review, American Economic Association, vol. 96(1), pages 394-404, March.
  4. Pierpaolo Battigalli & Giovanni Maggi, 2003. "International agreements on product standards: an incomplete-contracting theory," Working Papers 229, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Brian R. Copeland, 1990. "Strategic Interaction among Nations: Negotiable and Non-negotiable Trade Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 84-108, February.
  6. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
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