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WTO as Moral Support

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  • Taiji Furusawa

Abstract

International cooperation in trade policies under the auspices of the WTO makes countries “feel” more obliged to uphold agreements. The paper emphasizes the role of the WTO to give moral support: countries incur “psychological costs” when they renege on the agreements that are formally signed under the WTO. Using the concept of Kandori's (2003) “morale equilibrium,” we formalize this idea and show that countries can agree on a cooperative level of the binding tariffs but they occasionally deviate from the agreement, which lowers the morale and invites further deviations in the future.

Suggested Citation

  • Taiji Furusawa, 2009. "WTO as Moral Support," Review of International Economics, Wiley Blackwell, vol. 17(2), pages 327-337, May.
    • Handle: RePEc:bla:reviec:v:17:y:2009:i:2:p:327-337
    DOI: 10.1111/j.1467-9396.2009.00827.x
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    Cited by:

    1. Eiji Yamamura & Yoshiro Tsutsui, 2017. "Trade policy preference, childhood sporting experience, and informal school curriculum: Examination from the viewpoint of behavioral economics," Discussion Papers in Economics and Business 17-25, Osaka University, Graduate School of Economics.
    2. Kazutaka Takechi, 2023. "How are the precedents of trade policy rules made under the World Trade Organization?," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 806-821, November.

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