Working Paper: CEPR ID: DP3578
Authors: Kym Anderson
Abstract: The dispute resolution procedures of the World Trade Organization allow sanctions to be imposed when a country is unwilling to bring a WTO-inconsistent trade measure into conformity. Apart from the fact that the procedure for triggering the retaliation process has ambiguities that need to be removed, the retaliation itself has some undesirable economic features. This Paper looks at why compensation is not preferred to retaliation and then examines five economic features of the temporary trade retaliation that WTO may permit under certain conditions. Both efficiency and equity concerns are raised. The Paper concludes with some suggestions for reforming this part of WTO dispute resolution during the review of the Dispute Settlement Understanding that is due to be completed by May 2003.
Keywords: Compensation; Dispute Settlement; Retaliation; WTO
JEL Codes: F13; K33; K42; Q17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| procedural ambiguities (K40) | likelihood of protracted negotiations (D74) |
| current procedures (Y20) | complainants prefer retaliation over compensation (K41) |
| retaliation (M52) | economic welfare (complainant and respondent) (D69) |
| difficulty in ensuring equivalence (C30) | unequal economic welfare losses (D69) |
| retaliatory measures (D74) | compensation for past damages (J33) |
| current WTO rules (F13) | complainant's ability to exert pressure on respondent (K41) |