Enforcement, Private Political Pressure and the GATT/WTO Escape Clause
Kyle Bagwell and
Robert Staiger ()
No 10987, NBER Working Papers from National Bureau of Economic Research, Inc
We consider the design and implementation of international trade agreements when: (i) negotiations are undertaken and commitments made in the presence of uncertainty about future political pressures; (ii) governments possess private information about political pressures at the time that the agreement is actually implemented; and (iii) negotiated commitments can be implemented only if they are self-enforcing. We thus consider the design of self-enforcing trade agreements among governments that acquire private information over time. In this context, we provide equilibrium interpretations of GATT/WTO negotiations regarding upper bounds on applied tariffs and GATT/WTO escape clauses. We find that governments achieve greater welfare when they negotiate the optimal upper bound on tariffs rather than precise tariff levels; furthermore, when governments negotiate the optimal upper bound on tariffs, the observed applied tariffs often fall strictly below the bound. Our analysis also provides a novel interpretation of a feature of the WTO Safeguard Agreement, under which escape clause actions cannot be re-imposed in the same industry for a time period equal to the duration of the most recent escape clause action. We find that a dynamic usage constraint of this kind can raise the expected welfare of negotiating governments.
JEL-codes: F1 (search for similar items in EconPapers)
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Published as Bagwell, Kyle and Robert Staiger. “Enforcement, Private Political Pressure and the GATT/WTO Escape Clause.” The Journal of Legal Studies 34, 2 (June 2005): 471-513.
Published as Reprinted in Chad P. Bown (ed.), "The WTO, Safeguards, and Temporary Protection From Imports," Edward Elgar (Cheltenham, U.K.), 2006, 177-219.
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