Arbitration and Renegotiation in Trade Agreements

Mostafa Beshkar

No 2014-004, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: What can parties to a trade agreement achieve by institutionalizing a rules-based dispute settlement procedure? What types of renegotiation rules are implementable in an international setting like the WTO? What role can third-party arbitration play in dispute settlement? I study these questions within a mechanism design framework. The model generates predictions regarding the pattern of pre-trial and post-trial settlement negotiations, non-compliance with the arbitrators ruling, and retaliations under an optimal trade agreement. It is shown that an Arbitrated-Liability Regime, under which a defecting party is liable for damages only to the extent that an arbitrator specifies, could implement the optimal direct mechanism.

Keywords: Arbitration; Liability Rule; Property Rule; Safeguards; WTO (search for similar items in EconPapers)
JEL-codes: F13 K33 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2014-11
New Economics Papers: this item is included in nep-int and nep-law
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Citations: View citations in EconPapers (3)

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Journal Article: Arbitration and Renegotiation in Trade Agreements (2016)
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