Enforcement, private political pressure and the GATT/WTO escape clause

Abstract

We consider the design and implementation of international trade agreements when: (i) negotiations are undertaken and commitments made in the presence of uncertainty about future political pressures; (ii) governments possess private information about political pressures at the time that the agreement is actually implemented; and (iii) negotiated commitments can be implemented only if they are self-enforcing. We thus consider the design of self-enforcing trade agreements among governments that acquire private information over time. In this context, we provide equilibrium interpretations of GATT/WTO negotiations regarding upper bounds on applied tariffs and GATT/WTO escape clauses. We also provide a novel interpretation of a feature of the WTO Safeguard Agreement, under which escape clause actions cannot be re-imposed in an industry for a period equal to the duration of the most recent escape clause action. We find that a dynamic usage constraint of this kind can raise the expected welfare of negotiating governments