Enforcing International Trade Agreements with Imperfect Private Monitoring: Private Trigger Strategies and a Possible Role for the WTO

International trade disputes often involve the WTO as a third party that generates impartial opinions of potential violations when countries receive imperfect and private signals of violations. To identify the role that the WTO plays in enforcing trade agreements, this paper first characterizes what countries can achieve alone in a repeated bilateral trade relationship in which they can secretly raise their protection levels through concealed trade barriers. In particular, countries adopt gprivate trigger strategies (PTS)h under which each country triggers a punishment phase by imposing an explicit tariff based on its privately observed imperfect signals of such barriers. This paper identifies the condition under which countries can restrain the use of concealed barriers based on simple PTS, where each country imposes its static optimal tariff in all periods under any punishment phase: The sensitivity of private signals rises in response to an increase in concealed protection. Any equilibrium payoff under almost strongly symmetric PTS will be identical to the one under simple PTS, as long as the initial punishment is triggered by a static optimal tariff, justifying the paper's focus on simple PTS. With countries maximizing their expected payoffs under the optimal PTS, they will not push down the cooperative protection level to its minimum attainable level, thus not setting it to the free trade level even when it is attainable. To analyze a possible role of the WTO, this paper considers gthird-party trigger strategies (TTS)h under which the WTO allows each country to initiate a punishment phase based on the WTO's judgment (signals) about potential violations. The WTO changes the nature of punishment-triggering signals from private into public, enabling countries to use punishment phases of any length under TTS, which in turn facilitates a better cooperative equilibrium. The optimal TTS will involve an asymmetric and minimum punishment if the probability of a punishment phase being triggered is low enough, but it will entail punishments involving a permanent Nash tariff war if the probability of a punishment being triggered is high enough. A numerical comparison of the optimal TTS and optimal PTS indicates that the contribution of the WTO is likely to be significant when the signals of potential violations are relatively accurate. The WTO enables countries to adopt a more efficient punishment, such as the asymmetric and minimum punishment, which in turn enables countries to be less tolerant of potential violations and attain a higher level of cooperation as a result.

Sustaining Free Trade with Imperfect Private Information about Non-Tariff Barriers

This paper examines the issue of sustaining free trade when countries receive imperfect private information about each other’s non-tariff barriers. Because the countries can misrepresent their private belief about other countries’ protection levels, the punishment scheme to deter deviations from free trade should provide right incentives for the countries to elicit the true private information. This incentive constraint (ICP) restricts the length of punishment phases. If the private information is almost perfect, the ICP is not a binding constraint for symmetric countries in sustaining symmetric cooperation. However, the ICP does become a binding constraint if there exists a large enough asymmetry in the countries’ incentives to deviate from free trade, or if there exists a large enough asymmetry in the transparency of countries’ trade policies. Then, a mechanism that publicizes the information about non-tariff barriers, like Trade Policy Review Mechanism (TPRM) of WTO, can play a positive role in restoring cooperation by relaxing the ICP.International Economic Order, Non-tariff Barriers, Imperfect Private Information, Noncooperative Game

Enforcing International Trade Agreements with Imperfect Private Monitoring: Private Trigger Strategies and the Possible Role of the WTO

International trade disputes often involve the WTO as a third party that generates impartial opinions on potential violations when countries receive imperfect and private signals of violations. To identify the role that the WTO plays in enforcing trade agreements, this paper first explores what countries can achieve without the WTO by characterizing optimal private trigger strategies (PTS) under which each country triggers a punishment phase by imposing an explicit tariff based on privately-observed imperfect signals of the other country's concealed trade barriers. It identifies the condition under which countries can restrain the use of concealed barriers based on PTS and establishes that countries will not reduce the cooperative protection level to its minimum attainable level under the optimal PTS. This paper then considers third-party trigger strategies (TTS) under which the WTO allows each country to initiate a punishment phase based on the WTO's judgment (i.e., its signals) about potential violations. The WTO thus changes the nature of punishment-triggering signals from private into public, enabling countries to use punishment phases of any length under TTS, which in turn facilitates a better cooperative equilibrium. The optimal TTS will involve an asymmetric and minimum punishment if the probability of a punishment phase being triggered is lower than a critical level, but it will entail punishments involving a permanent Nash tariff war if the probability of a punishment phase is higher than a certain level. A numerical comparison of the optimal TTS and optimal PTS indicates that the contribution of the WTO is likely to be significant when the signals of potential violations are relatively accurate, as this enables countries to use a more efficient punishment, such as an asymmetric and minimum punishment.Concealed Trade Barriers, Imperfect Private Monitoring, International Trade Agreements, Repeated Game, Trade Disputes, Trigger Strategies, WTO

Enforcing International Trade Agreements with Imperfect Private Monitoring: Private Trigger Strategies and a Possible Role for the WTO

International trade disputes often involve the WTO as a third party that generates impartial opinions of potential violations when countries receive imperfect and private signals of violations. To identify the role that the WTO plays in enforcing trade agreements, this paper first characterizes what countries can achieve alone in a repeated bilateral trade relationship in which they can secretly raise their protection levels through concealed trade barriers. In particular, countries adopt "private trigger strategies (PTS)" under which each country triggers a punishment phase by imposing an explicit tariff based on its privately observed imperfect signals of such barriers. This paper identifies the condition under which countries can restrain the use of concealed barriers based on simple PTS, where each country imposes its static optimal tariff in all periods under any punishment phase: The sensitivity of private signals rises in response to an increase in concealed protection. Any equilibrium payoff under almost strongly symmetric PTS will be identical to the one under simple PTS, as long as the initial punishment is triggered by a static optimal tariff, justifying the paper's focus on simple PTS. With countries maximizing their expected payoffs under the optimal PTS, they will not push down the cooperative protection level to its minimum attainable level, thus not setting it to the free trade level even when it is attainable. To analyze a possible role of the WTO, this paper considers "third-party trigger strategies (TTS)" under which the WTO allows each country to initiate a punishment phase based on the WTO's judgment (signals) about potential violations. The WTO changes the nature of punishment-triggering signals from private into public, enabling countries to use punishment phases of any length under TTS, which in turn facilitates a better cooperative equilibrium. The optimal TTS will involve an asymmetric and minimum punishment if the probability of a punishment phase being triggered is low enough, but it will entail punishments involving a permanent Nash tariff war if the probability of a punishment being triggered is high enough. A numerical comparison of the optimal TTS and optimal PTS indicates that the contribution of the WTO is likely to be significant when the signals of potential violations are relatively accurate. The WTO enables countries to adopt a more efficient punishment, such as the asymmetric and minimum punishment, which in turn enables countries to be less tolerant of potential violations and attain a higher level of cooperation as a result.

Waist Circumference predicting Cardiovascular Disease in Korean Men and Women

Objective: Obesity and cardiovascular disease (CVD) are closely related and have become increasingly prevalent in Korea. Asians are more prone to obesity-related co-morbidities than Caucasians, even at lower body mass index (BMI) and/or smaller waist circumference (WC) values. Nevertheless, little is known regarding the association of WC with the risk of CVD in non-Caucasian populations. The authors conducted a prospective cohort study of WC and the risk of CVD in the Korean Heart Study.Methods: We examined the association of WC to CVD incidence among 53,026 Korean adults (30,152 men, 22,874 women) with no history of CVD and/or cancer. During a mean follow-up of 8.6 years, 2,722 incident cases of atherosclerotic cardiovascular disease (ASCVD) including 1,383 cases of ischemic heart disease (IHD) and 1,012 cases of stroke were documented. Results: Average WC at baseline was 84.0±8.2 cm in men and 75.2±8.9 cm in women. After adjustment for age and BMI, WC was significantly associated with cardiovascular risk factors (P <.001). In men, a WC of ≥91 cm was associated with an ASCVD hazard ratio (HR) of 1.62 (95% confidence interval (CI): 1.25, 2.10) and an IHD HR of 1.70 (95% CI: 1.19, 2.42) in comparison with a WC of <78 cm even after further adjustment for BMI and traditional risk factors (P for trend = 0.0118, 0.0139 respectively). In women, the progressive associations of WC with ASCVD, IHD and stroke were observed. These associations were however attenuated after further adjustment for BMI and traditional risk factors. The multivariable HRs for ASCVD, IHD, and stroke increased with higher WC in both men and women. Conclusions: Central obesity significantly and independently contributes to cardiovascular outcomes in Korean men and women

Reverse Electoral Business Cycles and Housing Markets

We argue that the political uncertainty generated by elections encourages private actors to delay investments that entail high costs of reversal, creating a pre-election decline in economic activity entitled a "reverse electoral business cycle." This incentive for delay becomes greater as policy differences between parties/candidates increase. Using new survey and observational data from the United States, we test these arguments. The individual-level analysis assesses whether respondents' perceptions of presidential candidates' policy differences increased the likelihood of postponing certain actions and purchases. For one of these items, housing, we collected observational data to examine whether electoral cycles indeed induce a pre-election decline in economic activity. The findings support the predictions and cannot be explained by existing theories of political business cycles.

Electoral Business Cycles in OECD Countries

Studies of OECD countries have generally failed to detect real economic expansions in the pre-election period, casting doubt on the existence of opportunistic political business cycles. We develop a theory that predicts a substantial portion of the economy experiences a real decline in the pre-election period. Specifically, the political uncertainty created by elections induces private actors to postpone investments with high costs of reversal. The resulting declines, referred to as reverse electoral business cycles, are larger the more competitive the electoral race and the greater the polarization between major parties. We test these predictions using quarterly data on private fixed investment in ten OECD countries between 1975 and 2006. The results suggest that reverse electoral business cycles exist, and as expected, depend on electoral competitiveness and partisan polarization. Moreover, simply by removing private fixed investment from gross domestic product (GDP), we uncover robust evidence of opportunistic cycles.

Dynamic Pricing in the Presence of Antidumping Policy: Theory and Evidence

Antidumping (AD) duties are calculated as the difference between the foreign firm's product price in the export market and some definition of 'normal' or 'fair' value, often the foreign firm's product price in its own market. Additionally, AD laws allow for recalculation of these AD duties over time in what are known as administrative reviews. This paper examines for the first time the resulting dynamic pricing problem of a foreign firm that faces such an AD trade protection policy in its export market. When AD duties are certain for any dumping that occurs, we obtain the surprising result that dumping and AD duties should increase over time toward a stationary equilibrium value. Adding uncertainties prevalent in AD enforcement into our analysis changes these conclusions substantially and leads to more realistic testable implications. Firms with ex ante expectations that the probability of AD enforcement is low, or with expectations that the probability of a termination/VER (instead of AD duties) is high, will decrease their dumping and AD duties over time in the administrative review process once they face AD duties. Using detailed data from U.S. AD investigations filed from 1980-1995, we find evidence consistent with these hypotheses stemming from our analysis with uncertain AD enforcement and provide empirical evidence consistent with James Anderson's domino dumping hypothesis.

Two-Photon Pathway to Ultracold Ground State Molecules of 23^{23}Na40^{40}K

We report on high-resolution spectroscopy of ultracold fermionic \nak~Feshbach molecules, and identify a two-photon pathway to the rovibrational singlet ground state via a resonantly mixed \Bcres intermediate state. Photoassociation in a $^{23}$Na-$^{40}$K atomic mixture and one-photon spectroscopy on \nak~Feshbach molecules reveal about 20 vibrational levels of the electronically excited \ctrip state. Two of these levels are found to be strongly perturbed by nearby \Bsing states via spin-orbit coupling, resulting in additional lines of dominant singlet character in the perturbed complex {${\rm B}^1\Pi |v{=}4\rangle {\sim} {\rm c}^3\Sigma^+ | v{=}25\rangle$}, or of resonantly mixed character in {${\rm B}^1\Pi | v{=}12 \rangle {\sim}{\rm c}^3\Sigma^+ | v{=}35 \rangle$}. The dominantly singlet level is used to locate the absolute rovibrational singlet ground state ${\rm X}^1\Sigma^+ | v{=}0, J{=}0 \rangle$ via Autler-Townes spectroscopy. We demonstrate coherent two-photon coupling via dark state spectroscopy between the predominantly triplet Feshbach molecular state and the singlet ground state. Its binding energy is measured to be 5212.0447(1) \cm, a thousand-fold improvement in accuracy compared to previous determinations. In their absolute singlet ground state, \nak~molecules are chemically stable under binary collisions and possess a large electric dipole moment of $2.72$ Debye. Our work thus paves the way towards the creation of strongly dipolar Fermi gases of NaK molecules.Comment: 23 pages, 8 figure