Working Paper: NBER ID: w19256
Authors: Robert W. Staiger; Alan O. Sykes
Abstract: The "non-violation" clause was a major focus of the drafters of GATT in 1947, and its relevance was revisited and reaffirmed with the creation of the WTO in 1995. And according to the terms-of-trade theory of trade agreements, it has an important role to play in facilitating the success of the "shallow integration" approach that the GATT/WTO has adopted. Yet despite the prominence given to the non-violation clause by its legal drafters and suggested by economic theory, in GATT/WTO practice the observed performance of the non-violation complaint has been weak. Can a model account for the observed features of the usage and outcomes of non-violation claims? And if so, what is implied by these weak performance measures about the (on- and off-) equilibrium impacts of the non-violation clause on the joint welfare of the GATT/WTO member governments? We develop a model of non-violation claims in trade agreements, demonstrate that it can account for the observed features of the usage and outcomes of non-violation claims, and show that the weak performance measures of observed non-violation claims are not inconsistent with a valuable role for the non-violation clause in the GATT/WTO.
Keywords: Nonviolation Clause; GATT; WTO; Trade Agreements; Dispute Resolution
JEL Codes: D02; F1; F13; K12; K33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nonviolation clause (F55) | success of shallow integration approach (O36) |
| weak performance measures of nonviolation claims (L49) | value of nonviolation clause (L49) |
| GATT/WTO institutional environment (F13) | exporters' incentive to challenge globally efficient policies (F14) |
| policy environment (L53) | importers' incentive to manipulate domestic policies (F13) |
| dispute selection effects (C52) | success rate of violation claims (K41) |
| dispute selection effects (C52) | success rate of nonviolation claims (L49) |
| nonviolation clause (F55) | policy interventions (D78) |