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Trade Disputes And Settlement

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  • Giovanni Maggi
  • Robert W. Staiger

Abstract

We develop a model of trade agreements with renegotiation and imperfectly verifiable information. In equilibrium, trade disputes can occur and can be resolved in a variety of ways: Governments may settle “early†or trigger a court ruling, and in the latter case, they may implement the ruling or reach a post†ruling settlement. The model yields predictions on how the dispute outcome depends on the contracting environment and how it correlates with the optimal contract form. We find support for a key prediction of our model using data on the outcomes of actual trade disputes in the General Agreement on Tariffs and Trade/World Trade Organization.

Suggested Citation

  • Giovanni Maggi & Robert W. Staiger, 2018. "Trade Disputes And Settlement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(1), pages 19-50, February.
    • Handle: RePEc:wly:iecrev:v:59:y:2018:i:1:p:19-50
    DOI: 10.1111/iere.12261
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    Cited by:

    1. Richardson, Martin & Stähler, Frank, 2019. "International agreements, economic sovereignty and exit," European Economic Review, Elsevier, vol. 120(C).
    2. Kohler, Wilhelm & Stähler, Frank, 2019. "The economics of investor protection: ISDS versus national treatment," Journal of International Economics, Elsevier, vol. 121(C).
    3. Mostafa Beshkar & Jee‐Hyeong Park, 2021. "Dispute Settlement With Second‐Order Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(4), pages 1433-1452, November.
    4. Kazutaka Takechi, 2023. "How are the precedents of trade policy rules made under the World Trade Organization?," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 806-821, November.
    5. Mei, Yuan, 2020. "Sustainable cooperation in international trade: A quantitative analysis," Journal of International Economics, Elsevier, vol. 123(C).
    6. Bown, Chad P. & Keynes, Soumaya, 2020. "Why Trump shot the Sheriffs: The end of WTO dispute settlement 1.0," Journal of Policy Modeling, Elsevier, vol. 42(4), pages 799-819.
    7. Maggi, Giovanni & Staiger, Robert W., 2020. "Learning by ruling and trade disputes," Journal of International Economics, Elsevier, vol. 126(C).
    8. Bart Kerremans, 2022. "Divergence Across the Atlantic? US Skepticism Meets the EU and the WTO’s Appellate Body," Politics and Governance, Cogitatio Press, vol. 10(2), pages 208-218.
    9. Dongyong Zhang & Stephen Morse & Qiaoyun Ma, 2019. "Corporate Social Responsibility and Sustainable Development in China: Current Status and Future Perspectives," Sustainability, MDPI, vol. 11(16), pages 1-23, August.
    10. Frank Stähler, 2023. "An optimal investor-state dispute settlement mechanism," Journal of Economics, Springer, vol. 138(1), pages 1-16, January.

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