RESEARCH AND ANALYSIS: WORKING PAPERS
Trade Skirmishes and Safeguards: A Theory of the WTO Dispute Settlement Process
I propose a framework within which to interpret and evaluate the major reforms introduced to the GATT system in its transition to the WTO. In particular, I examine the WTO Agreement on Safeguards that has replaced the GATT escape clause (Article XIX), and the Dispute Settlement Process (DSP) that resembles a court of law under the WTO.
Using this framework, I interpret the weakening of the reciprocity principle
under the Agreement on Safeguards as an attempt to reduce
efficiency-reducing trade skirmishes. The DSP is interpreted as an impartial
arbitrator
that announces its opinion about the state of the world when a dispute
arises among member countries. I demonstrate that the reforms in the GATT
escape clause should be bundled with the introduction of the DSP, in order
to maintain the incentive-compatibility of trade agreements. The model
implies that trade agreements under the WTO lead to fewer trade skirmishes
but this effect does not necessarily result in higher payoffs to the
governments. The model also implies that the introduction of the WTO court,
which has no enforcement power, can in fact improve the self-enforceability
of trade agreements.
No: ERSD-2009-09
Author:
Mostafa Beshkar — Yale University
Manuscript date: September 2009
Key Words:
Safeguard Agreement, Dispute Settlement, Impartial Arbitration, Trade Agreements.
JEL classification numbers:
F13, F51, F53, C72, K33, K41
Disclaimer
This is a working paper, and hence it represents research in progress. This paper represents the opinions of the author, and is the product of professional research. It is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the author. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division, World Trade Organization, Rue de Lausanne 154, CH 1211 Geneva 21, Switzerland. Please request papers by number and title.
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