Year: 2004
Type: report
Abstract: 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.
DOI: 10.3386/w10987
Authors: Kyle Bagwell, Robert Staiger
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2109949680