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Does Limited Punishment Limit the Scope for Cross-Retaliation?

Author

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  • Richard Chisik

    (Department of Economics, Ryerson University, Toronto, Canada)

  • Harun Onder

    (The World Bank)

Abstract

This paper analyzes two prominent institutional rules in the international trading system: a limited cross-retaliation rule characterized by the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) Article 22.3 and a limited punishment rule characterized by the General Agreement on Tariffs and Trade (GATT) Article XXVIII. In general, both rules are designed to limit the countermeasures upon a violation; however, the former rule specifies the limits of composition in retaliation, whereas the latter one designates the limits of retaliation magnitude. We show that, albeit seemingly unrelated, the limited cross-retaliation rule complements the limited punishment rule in per- mitting greater trade liberalization. Specifically, we show how the limited cross-retaliation rule also helps limit the incentives to violate the trade agreement when the limited punishment rule prevails.

Suggested Citation

  • Richard Chisik & Harun Onder, 2010. "Does Limited Punishment Limit the Scope for Cross-Retaliation?," Working Papers 025, Ryerson University, Department of Economics, revised Jul 2016.
  • Handle: RePEc:rye:wpaper:wp025
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    References listed on IDEAS

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    3. Richard Chisik & Harun Onder, 2017. "Does Limited Punishment Limit The Scope For Cross Retaliation?," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1213-1230, July.
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    Cited by:

    1. Harun Onder, . "Trade and Climate Change : An Analytical Review of Key Issues," World Bank Other Operational Studies, The World Bank, number 10036.
    2. Richard Chisik & Harun Onder, 2017. "Does Limited Punishment Limit The Scope For Cross Retaliation?," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1213-1230, July.
    3. Richard Chisik & Chuyi Fang, 2020. "Cross-retaliation and International Dispute Settlement," Working Papers 066, Ryerson University, Department of Economics.
    4. Hartigan, James C., 2018. "Punching out of one's weight class? Cross agreement retaliation in the WTO," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 274-288.
    5. Richard Chisik & Chuyi Fang, 2021. "Cross-retaliation and International Dispute Settlement," Working Papers 078, Ryerson University, Department of Economics.
    6. Onder, Harun, 2012. "Trade and Climate Change: An Analytical Review of Key Issues," World Bank - Economic Premise, The World Bank, issue 86, pages 1-8, August.
    7. Bowen, Renee, 2011. "Forbearance in Optimal Multilateral Trade Agreements," Research Papers 2085, Stanford University, Graduate School of Business.

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