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Tit-for-tat in trade policies: nothing but a fest for vested interests?

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  • DLUHOSCH, BARBARA

Abstract

Tit-for-tat (TFT) in trade policies is a common practice. It is even enshrined in Article 22.4 of the WTO's dispute settlement process within multilateral trade integration. As such, it is a well-recognized means for promoting cooperation and for enforcing compliance with a common set of rules or institutions. However, there is equally widespread concern that a strategy of TFT degenerates into a prisoner's dilemma, in particular because of special interests ill-using it as a springboard for advancing protectionist measures and beggar-thy-neighbor policies. This paper provides a novel evolutionary perspective on TFT in trade policy regimes in that it tracks the role of special interests by parameterizing their leverage on strategies. Doing so, it provides new insights on the political economy of TFT in international institutions. Accordingly, the set of parameters for which a prisoner's dilemma emerges shrinks rather than widens, even with powerful domestic interest groups sharing a stake in protection.

Suggested Citation

  • Dluhosch, Barbara, 2016. "Tit-for-tat in trade policies: nothing but a fest for vested interests?," Journal of Institutional Economics, Cambridge University Press, vol. 12(1), pages 217-239, March.
    • Handle: RePEc:cup:jinsec:v:12:y:2016:i:01:p:217-239_00
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    Cited by:

    1. Kjersti Nes & K. Aleks Schaefer, 2022. "Retaliatory use of public standards in trade," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 142-161, January.
    2. Aurélie Cassette & Etienne Farvaque, 2022. "American and Australian Tariff Policies: Do They Rock or Tango or Roll?," Sustainability, MDPI, vol. 14(20), pages 1-14, October.

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