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Does Limited Punishment Limit The Scope For Cross Retaliation?

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  • Richard Chisik
  • Harun Onder

Abstract

This paper analyzes two prominent institutional rules in the international trading system: a limited cross-retaliation rule characterized by the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) Article 22.3 and a limited punishment rule characterized by the General Agreement on Tariffs and Trade (GATT) Article XXVIII. In general, both rules are designed to limit the countermeasures upon a violation; however, the former rule specifies the limits of composition in retaliation, whereas the latter one designates the limits of retaliation magnitude. We show that, albeit seemingly unrelated, the limited cross-retaliation rule complements the limited punishment rule in per- mitting greater trade liberalization. Specifically, we show how the limited cross-retaliation rule also helps limit the incentives to violate the trade agreement when the limited punishment rule prevails.
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Suggested Citation

  • Richard Chisik & Harun Onder, 2017. "Does Limited Punishment Limit The Scope For Cross Retaliation?," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1213-1230, July.
  • Handle: RePEc:bla:ecinqu:v:55:y:2017:i:3:p:1213-1230
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    File URL: http://hdl.handle.net/10.1111/ecin.12431
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    Cited by:

    1. Onder, Harun, 2012. "Trade and Climate Change: An Analytical Review of Key Issues," World Bank - Economic Premise, The World Bank, issue 86, pages 1-8, August.
    2. Richard Chisik & Chuyi Fang, 2021. "Cross-retaliation and International Dispute Settlement," Working Papers 078, Ryerson University, Department of Economics.
    3. Richard Chisik & Harun Onder, 2017. "Does Limited Punishment Limit The Scope For Cross Retaliation?," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1213-1230, July.
    4. Richard Chisik & Chuyi Fang, 2020. "Cross-retaliation and International Dispute Settlement," Working Papers 066, Ryerson University, Department of Economics.
    5. Bowen, Renee, 2011. "Forbearance in Optimal Multilateral Trade Agreements," Research Papers 2085, Stanford University, Graduate School of Business.
    6. Hartigan, James C., 2018. "Punching out of one's weight class? Cross agreement retaliation in the WTO," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 274-288.

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