TRADE DISPUTES AND SETTLEMENT

We develop a model of trade agreements with renegotiation and imperfectly verifiable information. In equilibrium, trade disputes can occur and can be resolved in a variety of ways: Governments may settle "early" or trigger a court ruling, and in the latter case, they may implement the ruli...

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Bibliographic Details
Published inInternational economic review (Philadelphia) Vol. 59; no. 1; pp. 19 - 50
Main Authors Maggi, Giovanni, Staiger, Robert W.
Format Journal Article
LanguageEnglish
Published Philadelphia Wiley Periodicals, Inc 01.02.2018
Blackwell Publishing Ltd
Subjects
Courts
Disputes
Economic models
Economic theory
GATT
International trade
Negotiation
Trade agreements
Trade disputes
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Summary:We develop a model of trade agreements with renegotiation and imperfectly verifiable information. In equilibrium, trade disputes can occur and can be resolved in a variety of ways: Governments may settle "early" or trigger a court ruling, and in the latter case, they may implement the ruling or reach a post-ruling settlement. The model yields predictions on how the dispute outcome depends on the contracting environment and how it correlates with the optimal contract form. We find support for a key prediction of our model using data on the outcomes of actual trade disputes in the General Agreement on Tariffs and Trade/World Trade Organization.
Bibliography:This article has benefited from the helpful comments of the editor and three referees. For helpful discussions, we also thank Kyle Bagwell, Chad Bown, Paola Conconi, Arnaud Costinot, Dave Donaldson, Amit Khandelwal, Patrick Legros, Petros C. Mavroidis, Eduardo Morales, Emanuel Ornelas, Jee‐Hyeong Park, Carlo Perroni, Daniel Sturm, Alan Sykes, Chris Taber, Dan Trefler, and participants at conferences and seminars at Boston Univeristy, Columbia, Dartmouth, ECARES, LSE, MIT, Peking University, Seoul National Univeristy, Toronto, Stanford, The University of Melbourne, and Warwick. Woan Foong Wong and Junhui Zeng provided outstanding research assistance. Please address correspondence to: Robert W. Staiger, Department of Economics, Dartmouth College Hanover, NH 03755. E‐mail
rstaiger@dartmouth.edu
.
ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12261