Abstract
This paper explores the limits of international trade cooperation in the presence of a dispute settlement procedure. The dispute settlement procedure is modeled as set of conditions imposed on the punishment equilibria of a repeated tariff game, conditions that are consistent with the WTO principles of conciliation and reciprocity. The resulting equilibria are “renegotiation-proof” in the sense of Pearce [Renegotiation-proof equilibria: collective rationality and intertemporal cooperation. Yale Cowles Foundation Discussion Paper: 855, Yale University, 1987]. We find that tariff agreements cannot achieve free trade in the presence of the dispute settlement procedure, although the cost of this limitation becomes small for high discount factors. Quota agreements can achieve free trade under the dispute settlement procedure; however, countries would always prefer to settle disputes with tariff sanctions, if given a choice. These results are related to recent dispute settlement reforms.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
