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The Myth of 'Rebalancing' Retaliation in WTO Dispute Settlement Practice

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  • Holger Spamann

Abstract

It is generally assumed that trade retaliation under the WTO performs some kind of 'rebalancing' by allowing the injured Member to suspend 'concessions and obligations' vis-à-vis the violating Member of a level equivalent to the level of 'nullification and impairment' suffered by the injured Member. This article argues that this perception is misguided. The article first questions if a sensible comparator exists with which equivalence for purposes of 'rebalancing' could be evaluated. It then argues that WTO arbitration decisions do not even succeed in their limited goal of providing for retaliation that will affect trade in the same amount as the WTO-inconsistent measure at issue. One reason is the use of an asymmetric and underspecified trade effects comparator. The other reason is very significant miscalculation of the trade effects of the violation, as shown by detailed legal-economic analysis of all relevant arbitration decisions. The decisions concerning countermeasures against prohibited export subsidies do not make any attempt at 'rebalancing' in the first place. The article considers political explanations of arbitration decisions. It concludes with some suggestions for improvement. Copyright 2006, Oxford University Press.

Suggested Citation

  • Holger Spamann, 2006. "The Myth of 'Rebalancing' Retaliation in WTO Dispute Settlement Practice," Journal of International Economic Law, Oxford University Press, vol. 9(1), pages 31-79, March.
  • Handle: RePEc:oup:jieclw:v:9:y:2006:i:1:p:31-79
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    Cited by:

    1. Kyle Bagwell & Robert W. Staiger, 2009. "The WTO: Theory and Practice," NBER Working Papers 15445, National Bureau of Economic Research, Inc.
    2. Simon Schropp, Kornel Mahlstein, 2007. "The Optimal Design of Trade Policy Flexibility in the WTO," IHEID Working Papers 27-2007, Economics Section, The Graduate Institute of International Studies, revised Dec 2007.
    3. Simon Schropp, 2007. "Revisiting the "Compliance-vs.-Rebalancing" Debate in WTO Scholarship a Unified Research Agenda," IHEID Working Papers 29-2007, Economics Section, The Graduate Institute of International Studies, revised Dec 2007.

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