RECHERCHE ET ANALYSE: DOCUMENTS DE TRAVAIL
Indisputably Essential: The Economics of Dispute Settlement Institutions in Trade Agreements
Economic theory has made considerable progress in explaining why sovereign countries cooperate in trade. Central to most theories of trade cooperation are issues of self-enforcement: The threat of reprisal by an aggrieved party maintains the initial balance of concessions and prevents opportunism.
However, economic scholarship has been less coherent in explaining why
countries choose to settle and enforce their trade disputes with the help of
an impartial third party, a “trade court”. Typically, economists focusing on
the purpose of trade agreements have assumed away the very reasons why
institutions are needed, since under standard assumptions, neither defection
from the rules nor disputes are expected to occur.
This paper is a step towards the formulation of a coherent economic theory
of dispute settlement. It challenges traditional models of enforcement (primarily
concerned with acts of punishment) for being insufficient in explaining the
existence of dispute settlement institutions. We perform a comprehensive
analysis of the economics of dispute settlement institutions and demonstrate
to what extent the literatures of trade cooperation and dispute institutions
are (and should be) interlinked. On the basis of these theories, we show
that dispute settlement institutions in trade agreements may assume a
variety of roles, including that of an information repository and
disseminator, an honest broker, an arbitrator and calculator of damages, an
active information gatherer or an adjudicator.
No: ERSD-2007-02
Auteurs:
Alexander Keck — OMC
Simon Schropp — University of St. Gallen (HSG), HEI Geneva and NCCR
Democracy
Date de rédaction: septembre 2007
Mots clés:
Dispute settlement, trade, institutions, enforcement, WTO.
Cotes JEL:
F02, F13, F51, F53, F55, K33, K41, K42
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