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WTO Exceptions as Insurance


  • Ronald D. Fischer
  • Thomas J. Prusa


The paper formalizes the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks. The authors use a general-equilibrium model with several import competing sectors and assume incomplete markets so that agents cannot contract insurance. It is shown that sector-specific contingent protection measures are superior to uniform contingent tariffs as an insurance mechanism. A tax-cum-subsidy policy (i.e., taxing all sectors in order to subsidize the shocked sector) also improves welfare and is superior to contingent protection. Copyright Blackwell Publishing Ltd 2003.

Suggested Citation

  • Ronald D. Fischer & Thomas J. Prusa, 2003. "WTO Exceptions as Insurance," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 745-757, November.
  • Handle: RePEc:bla:reviec:v:11:y:2003:i:5:p:745-757

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    References listed on IDEAS

    1. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
    2. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999. "Relative labor productivity and the real exchange rate in the long run: evidence for a panel of OECD countries," Journal of International Economics, Elsevier, vol. 47(2), pages 245-266, April.
    3. Shang-Jin Wei & David C. Parsley, 1995. "Purchasing Power Disparity During the Floating Rate Period: Exchange Rate Volatility, Trade Barriers and Other Culprits," NBER Working Papers 5032, National Bureau of Economic Research, Inc.
    4. Jaebeom Kim & Masao Ogaki & Minseok Yang, 2003. "Structural Error Correction Models: Instrumental Variables Methods and an application to an exchange rate model," RCER Working Papers 502, University of Rochester - Center for Economic Research (RCER).
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    Cited by:

    1. Ronald Fischer & Martín Osorio, 2002. "Why Do We Need Antidumping Rules?," Documentos de Trabajo 134, Centro de Economía Aplicada, Universidad de Chile.
    2. Freund, Caroline & Ozden, Caglar, 2004. "Loss aversion and trade policy," Policy Research Working Paper Series 3385, The World Bank.
    3. Phillip McCalman & Frank Stähler & Gerald Willmann, 2011. "Contingent Trade Policy and Economic Efficiency," CESifo Working Paper Series 3424, CESifo Group Munich.
    4. Meredith A. Crowley, 2006. "The agreement on subsidies and countervailing measures: tying one's hands through the WTO," Working Paper Series WP-06-22, Federal Reserve Bank of Chicago.
    5. Douglas A. Irwin, 2005. "The Rise of US Anti-dumping Activity in Historical Perspective," The World Economy, Wiley Blackwell, vol. 28(5), pages 651-668, May.
    6. Douglas Irwin, 2004. "The Rise of U.S. Antidumping Actions in Historical Perspective," NBER Working Papers 10582, National Bureau of Economic Research, Inc.
    7. Khatibi, Arastou, 2014. "The signaling power of trade protection," Economics Letters, Elsevier, vol. 125(2), pages 226-228.
    8. Meredith A. Crowley, 2006. "Why are safeguards needed in a trade agreement?," Working Paper Series WP-06-06, Federal Reserve Bank of Chicago.

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