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Title:Trade skirmishes and safeguards: A theory of the WTO Dispute Settlement Process PDF Logo
Authors:Beshkar, Mostafa
Issue Date:2009
Series/Report no.:WTO Staff Working Paper ERSD-2009-09
Abstract: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.
Subjects:Safeguard Agreement
Dispute Settlement
Impartial Arbitration
Trade Agreements
JEL:F13
F51
F53
C72
K33
K41
Document Type:Working Paper
Appears in Collections:WTO Staff Working Papers, Economic Research and Statistics Division, WTO

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