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Limited Cross-retaliation and Lengthy Delays in International Dispute Settlement

Author

Listed:
  • Richard Chisik

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

  • Chuyi Fang

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

Abstract

We aim to provide a compelling explanation about why the World Trade Organi- zation (WTO) permits retaliation only after a lengthy delay and, furthermore, why it usually rejects requests for retaliation (or a reciprocal withdrawal of concessions) in other related international agreements. We take a dynamic mechanism design approach and compare the welfare effects between same and cross-sector retaliation with as well as without, delay. We show that the same-sector retaliation mechanism generates higher welfare and supports a higher self-enforcing level of cooperation than does the cross-sector retaliation mechanism. This result holds irrespective of whether there is a time lag between the initial violation and the corresponding retaliatory action. Furthermore, welfare is higher when retaliation is administered with a delay.

Suggested Citation

  • Richard Chisik & Chuyi Fang, 2017. "Limited Cross-retaliation and Lengthy Delays in International Dispute Settlement," Working Papers 066, Ryerson University, Department of Economics.
  • Handle: RePEc:rye:wpaper:wp066
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    File URL: http://economics.ryerson.ca/workingpapers/wp066.pdf
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    References listed on IDEAS

    as
    1. Kyle Bagwell, 2009. "Self-Enforcing Trade Agreements and Private Information," NBER Working Papers 14812, National Bureau of Economic Research, Inc.
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    5. repec:bla:ecinqu:v:55:y:2017:i:3:p:1213-1230 is not listed on IDEAS
    6. Robert Z. Lawrence, 2003. "Crimes and Punishments?: Retaliation under the WTO," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 372.
    7. 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.
    8. Beshkar, Mostafa, 2010. "Optimal remedies in international trade agreements," European Economic Review, Elsevier, vol. 54(3), pages 455-466, April.
    9. Chad P. Bown & Bernard M. Hoekman, 2005. "WTO Dispute Settlement and the Missing Developing Country Cases: Engaging the Private Sector," Journal of International Economic Law, Oxford University Press, vol. 8(4), pages 861-890, December.
    10. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    11. Chad P. Bown, 2004. "On the Economic Success of GATT/WTO Dispute Settlement," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 811-823, August.
    12. Beshkar, Mostafa, 2010. "Trade skirmishes safeguards: A theory of the WTO dispute settlement process," Journal of International Economics, Elsevier, vol. 82(1), pages 35-48, September.
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    More about this item

    Keywords

    WTO; dispute settlement; trade agreements; cross-sector retaliation; reciprocity; dynamic mechanism design.;

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