The Role of Dispute Settlement Procedures in International Trade Agreements

Giovanni Maggi and Robert Staiger

The Quarterly Journal of Economics, 2011, vol. 126, issue 1, 475-515

Abstract: Although disputes are typically treated as synonymous with concerns about enforcement in economic models of trade agreements, in reality most WTO disputes seem to concern the interpretation of vague provisions, or instances where the agreement is silent. And some have suggested that the WTO's Dispute Settlement Body (DSB) could usefully grant exceptions to rigid contractual obligations. These activist DSB roles could help "complete" an incomplete contract. But how activist should the DSB be? Should DSB rulings set precedent? We address these questions by characterizing the optimal choice of contract form and DSB mandate under various contracting conditions. JEL Codes: D02, D78, D86, F13, K12, K33. Copyright 2011, Oxford University Press.

Date: 2011
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