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Punishment and Dispute Settlement in Trade Agreements

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  • Wilfred J. Ethier
Abstract
This paper interprets dispute settlement procedures and punishments as responses to the fact that trade agreements are incomplete contracts. If no weight is given to the adjudication phase and if the degree of trade relatedness is known with certainty, the negotiated trade agreement will feature commensurate punishments, will induce violation of the dispute settlement ruling, and will deliver optimal liberalization and optimal unilateral trade-related action. With the adjudication phase of concern, the trade agreement will feature less liberalization, but still with a presumption of at least approximate commensurate punishment. The optimal trade agreement will likely induce abiding by the ruling when negotiators attach more importance to the adjudication phase, and violating it when they attach less.

Suggested Citation

  • Wilfred J. Ethier, "undated". "Punishment and Dispute Settlement in Trade Agreements," EPRU Working Paper Series 01-14, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:01-14
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    File URL: http://web.econ.ku.dk/epru/files/wp/WEB-blaa-2001-14.pdf
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    References listed on IDEAS

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    Cited by:

    1. Giovanni Maggi & Robert W. Staiger, 2009. "Breach, Remedies and Dispute Settlement in Trade Agreements," NBER Working Papers 15460, National Bureau of Economic Research, Inc.
    2. Pao-Li Chang, 2004. "The Politics of WTO Enforcement Mechanism," Working Papers 04-2004, Singapore Management University, School of Economics.
    3. Horn, Henrik & Mavroidis, Petros C., 2006. "A Survey of the Literature on the WTO Dispute Settlement System," CEPR Discussion Papers 6020, C.E.P.R. Discussion Papers.
    4. Tadashi Ito, 2007. "NAFTA and productivity convergence between Mexico and the US," IHEID Working Papers 26-2007, Economics Section, The Graduate Institute of International Studies, revised 27 Nov 2007.
    5. Wilfred J. Ethier, 2003. "TRIPS, externalities, trade agreements, hostages," PIER Working Paper Archive 03-034, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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