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Arbitration and Renegotiation in Trade Agreements

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  • Mostafa Beshkar

    (Indiana University)

Abstract

What can parties to a trade agreement achieve by institutionalizing a rules-based dispute settlement procedure? What types of renegotiation rules are implementable in an international setting like the WTO? What role can third-party arbitration play in dispute settlement? I study these questions within a mechanism design framework. The model generates predictions regarding the pattern of pre-trial and post-trial settlement negotiations, non-compliance with the arbitrators ruling, and retaliations under an optimal trade agreement. It is shown that an Arbitrated-Liability Regime, under which a defecting party is liable for damages only to the extent that an arbitrator specifies, could implement the optimal direct mechanism.

Suggested Citation

  • Mostafa Beshkar, 2014. "Arbitration and Renegotiation in Trade Agreements," CAEPR Working Papers 2014-004, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    • Handle: RePEc:inu:caeprp:2014004
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    References listed on IDEAS

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    Cited by:

    1. Mostafa Beshkar & Jee-Hyeong Park, 2017. "Dispute Settlement with Second-Order Uncertainty: The Case of International Trade Disputes," CAEPR Working Papers 2017-010, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    2. Richardson, Martin & Stähler, Frank, 2019. "International agreements, economic sovereignty and exit," European Economic Review, Elsevier, vol. 120(C).
    3. Kohler, Wilhelm & Stähler, Frank, 2019. "The economics of investor protection: ISDS versus national treatment," Journal of International Economics, Elsevier, vol. 121(C).
    4. Mostafa Beshkar & Jee‐Hyeong Park, 2021. "Dispute Settlement With Second‐Order Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(4), pages 1433-1452, November.
    5. Chad P. Bown & Kara M. Reynolds, 2017. "Trade Agreements and Enforcement: Evidence from WTO Dispute Settlement," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 64-100, November.
    6. Maggi, Giovanni & Staiger, Robert W., 2020. "Learning by ruling and trade disputes," Journal of International Economics, Elsevier, vol. 126(C).
    7. Silva, Francisco, 2019. "Renegotiation proof mechanism design with imperfect type verification," Theoretical Economics, Econometric Society, vol. 14(3), July.
    8. Frank Stähler, 2023. "An optimal investor-state dispute settlement mechanism," Journal of Economics, Springer, vol. 138(1), pages 1-16, January.
    9. Joel Watson, 2021. "Theoretical Foundations of Relational Incentive Contracts," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 631-659, August.

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    More about this item

    Keywords

    Arbitration; Liability Rule; Property Rule; Safeguards; WTO;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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