A theory of agreements and protection

In this thesis we propose a theory of contracts. Contracts are modelled as interacting processes with an explicit association of obligations and objectives. Obligations are specified using event structures. In this model we formalise two fundamental notions of contracts, namely agreement and protection. These notions arise naturally by interpreting contracts as multi-player concurrent games. A participant agrees on a contract if she has a strategy to reach her objectives (or to make another participant sanctionable for a violation), whatever the moves of her counterparts. A participant is protected by a contract when she has a strategy to defend herself in all possible contexts, even in those where she has not reached an agreement. When obligations are represented using classical event structures, we show that agreement and protection mutually exclude each other for a wide class of contracts. To reconcile agreement with protection we propose a novel formalism for modelling contractual obligations: event structures with circular causality. We study this model from a foundational perspective, and we relate it with classical event structures. Using this model, we show how to construct contracts which guarantee both agreement and protection. We relate our contract model with Propositional Contract Logic, by establishing a correspondence between provability in the logic and the notions of agreement and strategies. This is a first step towards reducing the gap between two main paradigms for modelling contracts, that is the one which interprets them as interactive systems, and the one based on logic

A theory of agreements and protection

In this thesis we propose a theory of contracts. Contracts are modelled as interacting processes with an explicit association of obligations and objectives. Obligations are specified using event structures. In this model we formalise two fundamental notions of contracts, namely agreement and protection. These notions arise naturally by interpreting contracts as multi-player concurrent games. A participant agrees on a contract if she has a strategy to reach her objectives (or to make another participant sanctionable for a violation), whatever the moves of her counterparts. A participant is protected by a contract when she has a strategy to defend herself in all possible contexts, even in those where she has not reached an agreement. When obligations are represented using classical event structures, we show that agreement and protection mutually exclude each other for a wide class of contracts. To reconcile agreement with protection we propose a novel formalism for modelling contractual obligations: event structures with circular causality. We study this model from a foundational perspective, and we relate it with classical event structures. Using this model, we show how to construct contracts which guarantee both agreement and protection. We relate our contract model with Propositional Contract Logic, by establishing a correspondence between provability in the logic and the notions of agreement and strategies. This is a first step towards reducing the gap between two main paradigms for modelling contracts, that is the one which interprets them as interactive systems, and the one based on logic

The Political Economy of Protection

This paper offers a selective, interpretative survey of the literature on the political economy of international trade policy. Unilateral trade policy and multilateral trade agreements are covered, but preferential trading arrangements are not. Much of the literature is characterized either by a discrepancy between what policymakers say they are doing and how the theory models their actions (the Cognitive Dissonance issue) or by a lack of a detailed microeconomic foundation (the Black Box issue).Political support function, Protection For Sale, trade agreements, exchange of market access

Economic and legal aspects of international environmental agreements: The case of enforcing and stabilising an international CO 2 agreement

The protection of the global environment is impeded by multilateral externalities which the international community attempts to bring under control by entering into international agreements. International agreements, however, can suffer from non-compliance and free-riding behaviour by sovereign states and must therefore be enforced and stabilised internationally. This paper describes instruments for the enforcement and stabilisation of an international CO2 agreement and evaluates them in the light of economic and legal theory. Economic instruments build on repetition and use utility transfers, economic sanctions and flexible treaty adjustments. Important legal instruments are reciprocal obligations and cooperation duties, international funding and transfer rules, treaty suspension, retorsions and reprisals, treaty revision, and monitoring. The paper shows that economic and legal instruments are compatible to a considerable extent. It develops proposals for the enforcement and stabilisation of a global CO2 agreement and other multilateral treaties.International environmental agreements,international cooperation,non-compliance,enforcement,global warming,international law

Reciprocity in free trade agreements

The author uses detailed trade, tariff, and income data for countries involved in 91 trade agreements negotiated since 1980 to test for reciprocity in free trade agreements. The results offer strong evidence of reciprocity in North-North and South-South free trade agreements, but there is little empirical support for reciprocity in North-South trade agreements. In particular, after controlling for other determinants of trade preferences, the results suggest that a one percent increase in preferences offered leads to about a one-half of a percent increase in preferences received in North-North and South-South trade agreements. Freund also finds evidence that large countries extract greater trade concessions from small countries. This leads to a modified form of reciprocity in North-South agreements. A large increase in access to a developing country market leads to only a small increase in access to a rich country market. The results imply that there are incentives for countries to maintain protection in order to extract more concessions from trade partners. But in general, such perverse incentives should be less of a concern in developing countries involved in North-South agreements because the value of a developing country tariff preference in terms of its effect on trade preferences from a rich country is quite small. The gains from unilateral liberalization are likely to far outweigh potential gains from using protection as a bargaining chip in trade negotiations. The evidence is consistent with a repeated game model of trade liberalization. The model presented shows that trade preferences granted are increasing in trade preferences received. This implies that countries can extract greater concessions from trade agreement members if they have higher external trade barriers. However, if a country's trade barriers are very large then the gains from reneging on the agreement in the short run will be high, making the agreement unenforceable despite offering long-term gains. So, there is a reciprocity-credibility tradeoff. High tariffs may allow countries to extract more concessions from potential trade agreement partners, but they also make the country less credible in actually implementing agreed tariff concessions. If a country's external tariff is very high relative to other countries, then it will not be able to commit credibly to any free trade agreement.Rules of Origin,Trade Policy,Common Carriers Industry,Economic Theory&Research,Environmental Economics&Policies,Trade and Regional Integration,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Rules of Origin,Economic Theory&Research

The evolution of trade treaties and trade creation : lessons for Latin America

The author examines the main distinction between trade liberalization under the General Agreement on Tariffs andTrade (GATT) and under regional trading agreements. Under the GATT, trade liberalization is based on the most-favored-nation principle. Under regional trade agreements, it is based on preferential trade. Establishing regional trade agreements does not necessarily lead to greater regional integration. The European Economic Community has been an exception, and with greater integration, regional trade has grown steadily. The Association of South East Asian Nations (ASEAN) has been a weak association, but trade among ASEAN members has increased rapidly because member countries have undertaken multilateral trade liberalization. The efforts of Latin American countries to create regional trade associations in the 1960s, based on protectionist policies, reduced trade not only regionally, but with the rest of the world. In contrast, the Latin American regional trading agreements of the 1980s and 1990s have liberalized trade among the groups. Proper regional trading agreements must conform to Article XXIV of the GATT, but nearly all the countries that have created regional integration schemes have not followed it. These regional trading agreements have not increased protection, but neither has there been across-the-board trade liberalization. Regional trading agreements carry with them the danger of trade diversion (when imports that used to come from third countries at lower prices become costlier because of preferential access granted to a higher-cost regional source). How can Latin American countries reduce trade diversion in their regional trading agreements? : 1) keep protection low in the first place; 2) have open regional trade associations (so that it is easy for new partners to join); 3) continue liberalizing trade with the rest of the world, following the most-favored-nation principle; 4) establish common markets rather than free trade areas (because rules of origin create new barriers, including bureaucracies); 5) coordinate regulatory and competition policies (eliminate laws that limit competition and adopt common external tariffs); and 6) improve roads, ports, and means of communications.TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade and Regional Integration,Trade Policy,Economic Theory&Research,Environmental Economics&Policies

AN AGENDA FOR THE DESIGN AND STUDY OF INTERNATIONAL ENVIRONMENTAL AGREEMENTS

The combination of a general greening of international political debate, and the events of 1992 at the Rio Earth summit have led to great interest in the question of global environmental protection. While it is recognized that international environmental agreements (IEAs) are the means by which the earths fragile environment is most likely to be protected, this recognition has been recent. Hence, there is very little formal research on the design and study of IEAs. As such, in this paper, I propose and describe a research agenda for the design and study of IEAs. Very generally, I propose that we frame the IEA design question as a problem in mechanism design. We will then be able to use, inter alia, the theory of common agency and the theory of hierarchies to generate interesting new theoretical and practical insights into the workings of IEAs. Note: Forthcoming in Ecological Economicsinternational, environmental, agreement, design, game, Environmental Economics and Policy, International Relations/Trade, D73, D82, L50,

Global Animal Law and International Trade Law After EC-Seal Products: An Interactional Analysis

This thesis is a case study of the formation of new norms in international law. The norms are those that concern animal protection. The thesis argues that international trade law is playing a part in the development of international legal norms for animal protection. The theoretical model applied is interactional international law, the theory of the constructivist international legal scholars Jutta Brunnée and Stephen Toope. Interactional theory posits that legitimate, binding international law arises from norms based on shared understandings, exhibits specifically legal characteristics that correspond to Lon Fuller’s criteria of legality, and is created, maintained and supported through interaction of a practice of legality. The thesis argues that the international trade regime gives rise to practices of legality that enable the development of animal protection norms as contemplated by interactional theory. Two main practices of legality within international trade governance are reviewed. One is adjudication in the WTO dispute settlement system. The most important case here is the WTO’s 2014 decision on the EU ban on trade in seal products, which was justified as a response to public moral concerns about animal welfare and cruelty in the seal hunt. The second practice of legality considered is law formation and implementation under new preferential trade agreements outside the WTO system. The thesis analyzes affirmative obligations under environmental side agreements, especially the Environment Chapter of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The thesis argues that, despite the long-standing hostility of animal advocates to economic globalization, the legal structures of global economic governance provide important opportunities to drive the development of robust and effective animal protection norms

Winners and Losers in a Free Trade Area between The United States and MERCOSUR

This document considers an eventual Free Trade Area between the US and MERCOSUR with the objective of constructing two lists of products (HS 6 digits), one expansive (trade opportunities) and one defensive (trade perils), for each of the participants in the agreement. The theoretical model of reference is the Grossman and Helpman model of the politics of Free Trade Agreements. An original methodology for the opportunities and perils determination based on trade specialisation indexes and trade policy data has been developed. The economic size asymmetries have been introduced into the analysis through an empirical implementation of the regimes of protection typology provided by the theory (enhanced and reduced protection). The main conclusions are: i) agricultural producers in the US face a peril while agricultural producers in MERCOSUR could have opportunities (improvement in international prices); ii) there are no evident opportunities for US producers in the MERCOSUR (reduced size of the market) while producers of manufactures in the MERCOSUR face an evident peril in the regional market; and iii) MERCOSUR opportunities are concentrated in lighter manufactures.

(Self-) Enforcement of Joint Implementation and Clean Development Mechanism Contracts

International climate protection investments (Joint Implementation and Clean Development Mechanism projects) are burdened with problems of contract enforcement, which prevent the realisation of efficiency gains associated with these investments. The paper analyses this problem from the perspective of non-cooperative game theory and proposes two different solutions to the co-operation problem. The first analyses the potential role of national environmental authorities in facilitating credible commitment of the project host operating under its jurisdiction. It is argued that the threat of punishing the project host if he breaches the contract may serve this purpose. The effective level of punishment is derived. The second option involves strategic delegation of contract implementation to a third party operating under the same jurisdiction as the project host. Again, the paper explores the conditions that ensure incentive-compatibility. Both options are based on the idea that the project sponsor may commit himself credibly by becoming a Stackelberg leader.Joint Implementation, Clean Development Mechanism, climate protection, international environmental agreements, international investments, contract enforcement, co-operation, incentive compatibility