180 research outputs found

    The Optimal Design of Trade Policy Flexibility in the WTO

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    This paper is a contribution to the literature on rational design of trade agreements. The World Trade Organization (WTO) is an incomplete contract among sovereign states. Incomplete contracts contain gaps. Ex post, contractual gaps may leave gains from trade unrealized; they may create “regret” in signatories once unanticipated contingencies or sudden protectionist backlashes have occurred. Trade policy flexibility mechanisms, such as the “safeguards clause” under Art. XIX GATT, are geared towards seizing ex post regret by allowing parties affected by a protectionist shock to partially and temporarily withdraw from previously made trade liberalization concessions – given that they compensate the victim(s) of such backtracking behavior. This paper examines the somewhat understudied issue of optimal trade policy flexibility design in the WTO: In particular, we analyze whether ex post escape should be organized by means of a unilateral opt-out clause (a “liability rule” of escape), or a bilateral renegotiation provision (a “property rule” of escape). Modeling the WTO as a fully non-contingent tariff liberalization contract with contingencies (or “states of nature”) asymmetrically revealed, we find that a liability rule backed by expectation remedies payable to the affected victim Pareto-dominates both a renegotiation clause, as well as any other remedy arrangement connected to a liability rule. Only the remedial design of liability-cum-expectation damages yields the desirable incentives to liberalize ex ante, and to default ex post and therewith is able to replicate the outcomes of the hypothetical contracting ideal of the complete contingent contract.Incomplete contracts, remedies, enforcement, WTO, trade renegotiations, WTO Dispute Settlement,

    Outsourcing and Competition Policy

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    We analyze optimal competition policy by a Competition Agency (CA) in a model with two countries, North and South, where a final good is produced by Northern oligopolistic firms using an input that can either be produced within the firm (vertical integration) or outsourced to Southern oligopolistic producers with lower labor costs (outsourcing). In the case where the final good is only consumed in the North and there is free entry in the South, we find that optimal competition policy in the North is the adoption of a tougher stance. However, with a CA in the South, the Southern CA would optimally appropriate outsourcing rents through restrictions on the degree of competition among domestic firms. In this case the optimal response of the Northern CA would be inaction. In the case where the final good is consumed in both countries, we find that optimal competition policy is marginally affected by the share of Southern consumption, leaving relatively important incentives to engage in rent-shifting. However, for a high enough share of Southern consumption, the interaction between the Northern and Southern CA is shown to be of the Prisoner's Dilemma type, whereby the Nash equilibrium is Pareto-suboptimal and mutual cooperation on competition policy is globally desirable.Competition policy, outsourcing, vertical integration

    Regional climate change patterns identified by cluster analysis

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    Climate change caused by anthropogenic greenhouse emissions leads to impacts on a global and a regional scale. A quantitative picture of the projected changes on a regional scale can help to decide on appropriate mitigation and adaptation measures. In the past, regional climate change results have often been presented on rectangular areas. But climate is not bound to a rectangular shape and each climate variable shows a distinct pattern of change. Therefore, the regions over which the simulated climate change results are aggregated should be based on the variable(s) of interest, on current mean climate as well as on the projected future changes. A cluster analysis algorithm is used here to define regions encompassing a similar mean climate and similar projected changes. The number and the size of the regions depend on the variable(s) of interest, the local climate pattern and on the uncertainty introduced by model disagreement. The new regions defined by the cluster analysis algorithm include information about regional climatic features which can be of a rather small scale. Comparing the regions used so far for large scale regional climate change studies and the new regions it can be shown that the spacial uncertainty of the projected changes of different climate variables is reduced significantly, i.e. both the mean climate and the expected changes are more consistent within one region and therefore more representative for local impact

    Time of emergence of climate signals

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    The time at which the signal of climate change emerges from the noise of natural climate variability (Time of Emergence, ToE) is a key variable for climate predictions and risk assessments. Here we present a methodology for estimating ToE for individual climate models, and use it to make maps of ToE for surface air temperature (SAT) based on the CMIP3 global climate models. Consistent with previous studies we show that the median ToE occurs several decades sooner in low latitudes, particularly in boreal summer, than in mid-latitudes. We also show that the median ToE in the Arctic occurs sooner in boreal winter than in boreal summer. A key new aspect of our study is that we quantify the uncertainty in ToE that arises not only from inter-model differences in the magnitude of the climate change signal, but also from large differences in the simulation of natural climate variability. The uncertainty in ToE is at least 30 years in the regions examined, and as much as 60 years in some regions. Alternative emissions scenarios lead to changes in both the median ToE (by a decade or more) and its uncertainty. The SRES B1 scenario is associated with a very large uncertainty in ToE in some regions. Our findings have important implications for climate modelling and climate policy which we discuss

    Ice-free at 1.5°C?

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    Rapid CommunicationThis is the author accepted manuscript. The final version is available from Nature Publishing Group via the DOI in this record

    How large are projected 21st century storm track changes?

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    Projected changes in the extra-tropical wintertime storm tracks are investigated using the multi-model ensembles from both the third and fifth phases of the World Climate Research Programme's Coupled Model Intercomparison Project (CMIP3 and CMIP5). The aim is to characterize the magnitude of the storm track responses relative to their present-day year-to-year variability. For the experiments considered, the ‘middle-of-the-road’ scenarios in each CMIP, there are regions of the Northern Hemisphere where the responses of up to 40% of the models exceed half of the inter-annual variability, and for the Southern Hemisphere there are regions where up to 60% of the model responses exceed half of the inter-annual variability

    Estimating the economic effects of sanctions on Russia : an allied trade embargo

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    1 document, 1 datasetThis brief aims to contribute to the ongoing discussion on the use of sanctions as a coercive tool of international policymaking, focusing on the economic effects of the sanctions on the Russian Federation (“Russia”) following its invasion of Ukraine. Using computable general equilibrium modeling, we explore the short- to medium-term economic effects of a possible trade embargo by Allied countries imposed on Russia and Belarus. We consider the Allied trade embargo as a set of comprehensive trade sanctions that includes (i) import-related measures, (ii) export-related measures, (iii) FDI-related measures, and, as a spill-over effect, (iv) increased trade costs between Russia and non-Allies. We find that Russia would sustain sizable losses of upwards of 14% of real GDP from an Allied trade embargo, even in the short run. The largest contribution to Russia’s economic pain results from the exit of Allied foreign direct investment (FDI). Belarus is only marginally affected by an Allied trade embargo. Allied economies are unevenly affected by the sanctions, with real GDP losses between 0.1% and 1.6%. Non-allied economies benefit from some trade diversion, but experience even larger losses from the increased costs of trading and doing business with Russia. For example, real GDP losses to China, India, and Turkey are 0.02%, 0.04%, and 0.13%, respectively. China joining the group of Allies results in greater economic losses for Russia; Allied economies and China would be adversely affected by this move. Finally, Russia would suffer significantly higher losses if it were the party enacting countersanctions, rather than resigning itself to being a sanction target

    On the state dependency of fast feedback processes in (palaeo) climate sensitivity

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    Palaeo data have been frequently used to determine the equilibrium (Charney) climate sensitivity SaS^a, and - if slow feedback processes (e.g. land ice-albedo) are adequately taken into account - they indicate a similar range as estimates based on instrumental data and climate model results. Most studies implicitly assume the (fast) feedback processes to be independent of the background climate state, e.g., equally strong during warm and cold periods. Here we assess the dependency of the fast feedback processes on the background climate state using data of the last 800 kyr and a conceptual climate model for interpretation. Applying a new method to account for background state dependency, we find Sa=0.61±0.06S^a=0.61\pm0.06 K(Wm−2^{-2})−1^{-1} using the latest LGM temperature reconstruction and significantly lower climate sensitivity during glacial climates. Due to uncertainties in reconstructing the LGM temperature anomaly, SaS^a is estimated in the range Sa=0.55−0.95S^a=0.55-0.95 K(Wm−2^{-2})−1^{-1}.Comment: submitted to Geophysical Research Letter
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