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How Should ‘Protection’ be Evaluated in Art. III GATT Disputes?

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  • Neven, Damien J

Abstract

This Paper considers the economic analysis of non-tariff barriers in the context of disputes under Art. III of the GATT. This article establishes the principle of National Treatment, which requires WTO Members not to introduce internal measures that protect domestic products. We first observe that the appropriate measure of protection and the level of protection that is acceptable have hardly been discussed in the case law and that panels tend to presume that a strong substitution between domestic and foreign products always lead to substantial protection. Next, we consider a stylized model of trade and find that the ability to raise price is a robust measure of protection and that protection falls significantly (for a given barrier) with the degree of product differentiation but also with the degree of rivalry. We also observe that the effects of non-tariff barriers on import values in ambiguous so that imports are not a robust measure of protection. Our findings suggest that the distinction drawn in the case law between ‘like’ and ‘directly competitive and substitutable’ products is not helpful. Finally, we suggest a method to evaluate protection in trade disputes, which is inspired by the definition of the relevant market in antitrust.

Suggested Citation

  • Neven, Damien J, 2000. "How Should ‘Protection’ be Evaluated in Art. III GATT Disputes?," CEPR Discussion Papers 2613, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2613
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    Keywords

    GATT; Market Definition; Protection;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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