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On the efficiency of retaliation rules in international trade

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  • GINSBURGH, V.
  • WEBER, S.

Abstract

Though retaliation to discriminatory measures taken by a trading partner are made possible by international treaties (GATT and WTO in particular), it is rarely used. We give theoretical reasons for which this has been the case. We also show that the retaliation mechanism which is built into the GATT-WTO rules prevents tariff wars, but does not necessarily lead to free trade. We provide an alternative retaliation rule which yields free trade as the unique equilibrium of the tariff game.
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Suggested Citation

  • Ginsburgh, V. & Weber, S., 1997. "On the efficiency of retaliation rules in international trade," LIDAM Reprints CORE 1281, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1281
    Note: In : Annales d'économie et de statistique, 47, 51--63, 1997.
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    1. Bhagwati, Jagdish N. & Srinivasan, T. N., 1976. "Optimal trade policy and compensation under endogenous uncertainty: The phenomenon of market disruption," Journal of International Economics, Elsevier, vol. 6(4), pages 317-336, November.
    2. Hindley, Brian, 1987. "GATT Safeguards and Voluntary Export Restraints: What Are the Interests of Developing Countries?," The World Bank Economic Review, World Bank, vol. 1(4), pages 689-705, September.
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    5. Jorge F. Perez-Lopez, 1989. "Case for a GATT Code on Temporary Measures," The World Economy, Wiley Blackwell, vol. 12(1), pages 53-68, March.
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    7. Bhagwati, Jagdish N., 1976. "Market disruption, export market disruption, compensation and GATT reform," World Development, Elsevier, vol. 4(12), pages 989-1020, December.
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    Cited by:

    1. Benjamin H. Liebman & Kasaundra M. Tomlin, 2008. "Safeguards and Retaliatory Threats," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 351-376, May.
    2. Benjamin Liebman & Kasaundra Tomlin, 2015. "World Trade Organization sanctions, implementation, and retaliation," Empirical Economics, Springer, vol. 48(2), pages 715-745, March.

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