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National Treatment in the GATT

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  • Henrik Horn

Abstract

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.

Suggested Citation

  • Henrik Horn, 2006. "National Treatment in the GATT," American Economic Review, American Economic Association, vol. 96(1), pages 394-404, March.
    • 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. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, and International Economic Institutions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 519-562.
    2. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    3. 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.
    4. Henrik Horn, 2006. "National Treatment in the GATT," American Economic Review, American Economic Association, vol. 96(1), pages 394-404, March.
    5. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
    6. Pierpaolo Battigalli & Giovanni Maggi, 2003. "International agreements on product standard: an incomplete contracting theory," NBER Working Papers 9533, National Bureau of Economic Research, Inc.
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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