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WTO Exceptions as Insurance

Author

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  • Ronald D. Fischer
  • Thomas J. Prusa

Abstract

The paper formalizes the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks. The authors use a general‐equilibrium model with several import competing sectors and assume incomplete markets so that agents cannot contract insurance. It is shown that sector‐specific contingent protection measures are superior to uniform contingent tariffs as an insurance mechanism. A tax‐cum‐subsidy policy (i.e., taxing all sectors in order to subsidize the shocked sector) also improves welfare and is superior to contingent protection.

Suggested Citation

  • Ronald D. Fischer & Thomas J. Prusa, 2003. "WTO Exceptions as Insurance," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 745-757, November.
    • Handle: RePEc:bla:reviec:v:11:y:2003:i:5:p:745-757
    DOI: 10.1046/j.1467-9396.2003.00415.x
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    References listed on IDEAS

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    1. Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry-Specific Protection: Antidumping in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994 Micr), pages 51-118.
    2. Anne Krueger, 1995. "American Trade Policy: A Tragedy in the Making," Books, American Enterprise Institute, number 53526, September.
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    Cited by:

    1. Khatibi, Arastou, 2014. "The signaling power of trade protection," Economics Letters, Elsevier, vol. 125(2), pages 226-228.
    2. Phillip McCalman & Frank Stähler & Gerald Willmann, 2019. "Contingent trade policy and economic efficiency," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(2), pages 227-255, May.
    3. Meredith A. Crowley, 2006. "Why are safeguards needed in a trade agreement?," Working Paper Series WP-06-06, Federal Reserve Bank of Chicago.
    4. Meredith A. Crowley, 2006. "The agreement on subsidies and countervailing measures: tying one's hands through the WTO," Working Paper Series WP-06-22, Federal Reserve Bank of Chicago.
    5. Leonardo Baccini, 2010. "Explaining formation and design of EU trade agreements: The role of transparency and flexibility," European Union Politics, , vol. 11(2), pages 195-217, June.
    6. Freund, Caroline & Ozden, Caglar, 2004. "Loss aversion and trade policy," Policy Research Working Paper Series 3385, The World Bank.
    7. Ronald Fischer & Martín Osorio, 2002. "Why Do We Need Antidumping Rules?," Documentos de Trabajo 134, Centro de Economía Aplicada, Universidad de Chile.
    8. Mr. Douglas A. Irwin, 2005. "The Rise of U.S. Antidumping Activity in Historical Perspective," IMF Working Papers 2005/031, International Monetary Fund.
    9. Douglas Irwin, 2004. "The Rise of U.S. Antidumping Actions in Historical Perspective," NBER Working Papers 10582, National Bureau of Economic Research, Inc.

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