Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/82069 
Year of Publication: 
2001
Series/Report no.: 
EPRU Working Paper Series No. 2001-14
Publisher: 
University of Copenhagen, Economic Policy Research Unit (EPRU), Copenhagen
Abstract: 
This paper interprets dispute settlement procedures and punishments as responses to the fact that trade agreements are incomplete contracts. If no weight is given to the adjudication phase and if the degree of trade relatedness is known with certainty, the negotiated trade agreement will feature commensurate punishments, will induce violation of the dispute settlement ruling, and will deliver optimal liberalization and optimal unilateral trade-related action. With the adjudication phase of concern, the trade agreement will feature less liberalization, but still with a presumption of at least approximate commensurate punishment. The optimal trade agreement will likely induce abiding by the ruling when negotiators attach more importance to the adjudication phase, and violating it when they attach less.
Document Type: 
Working Paper

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