the role of multilateral institutions in international trade cooperation the world trade organization wfo lacks the power to directly enforce agreements it is therefore important to understand what role the wto can play to facilitate international cooperation and whether a multilateral institution can offer distinct advantages over a web of bilateral agreements this paper examines two potential benefits of a multilateral trade institution first verifying violations of the agreements and informing third parties thus facilitating multilateral reputation mechanisms second promoting multilateral trade negotiations rather than a web of bilateral negotiations the model suggests that a multilateral approach is particularly important when there are strong imbalances in bilateral trading relationships

tariff retaliation versus financial compensation in the enforcement of international trade agreements the authors analyze whether financial compensation is preferable to the current system of dispute settlement in the world trade organization that permits member countries to impose retaliatory tariffs in response to trade violations committed by other members they show that monetary fines are more efficient than tariffs in terms of granting compensation to injured parties when there are violations in equilibrium however fines suffer from an enforcement problem since they must be paid by the violating country if fines must ultimately be supported by the threat of retaliatory tariffs they fail to yield a more cooperative outcome than the current system the authors also consider the use of bonds as a means of settling disputes if bonds can be posted with a third party they do not have to be supported by retaliatory tariffs and can improve the negotiating position of countries that are too small to threaten tariff retaliation

wage norms capital accumulation and unemployment a post keynesian view the paper presents a post keynesian view of unemployment it argues first that the effective labour demand need not be downward sloping with respect to real wages and aggregate demand need not be downward sloping with respect to inflation second that there is a broad case for unemployment hysteresis understood as endogeneity of the non accelerating inflation rate of unemployment nairu based on social norms in wage bargaining and on the supply side effects of capital accumulation and third that much as keynes argued capital investment rather than labour market institutions is the key variable to explain changes in aggregate unemployment performance across countries and over time overall the paper advocates a keynesian view of the nairu where effective demand determines unemployment in the short run and the deviation of actual unemployment from the nairu determines the change in inflation in the medium term the nairu is endogenous and follows actual unemployment copyright 2011 oxford university press

backward stealing and forward manipulation in the wto abstract motivated by the structure of wto negotiations we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most favored nation mfn principle we identify backward stealing and forward manipulation problems that arise when governments bargain under the mfn principle in a sequential fashion we show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed we identify the wto nullification or impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems in this way we suggest that wto rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

hysteresis in unemployment after two decades of ratcheting unemployment in europe most economists agree that structural changes associated with higher equilibrium rates of unemployment have occurred but the direction of causality is a matter of controversy have the structural changes caused the long lasting increases in actual unemployment or have the increases in actual unemployment caused the structural changes the latter possibility is often referred to as hysteresis during the past decade a distinct research program has evolved around the idea that equilibrium employment tracks actual unemployment this survey reviews the various hysteretic explanations offered in the literature and evaluates their empirical standing

developing countries as plaintiffs and defendants in gatt wto trade disputes developing countries have been increasing their participation in the formal institutions and proceedings of the multilateral trading system a prominent example is their more frequent involvement as defendants and plaintiffs in gatt wto trade disputes this paper provides an initial economic appraisal of developing country performance in the gatt wto dispute settlement system we measure the economic resolution of these disputes through trade liberalisation gains and our results suggest that developing country plaintiffs have had more success under wto disputes than was the case under the gatt we also document evidence on potential determinants of this success the capacity for plaintiffs to make credible retaliatory threats and the guilty determinations by gatt wto panels finally there is also some evidence that developing countries have recognised the importance of retaliatory threats and have responded by changing their pattern of dispute initiation under the wto to better take advantage of the instances in which they have sufficient leverage to threaten retaliation and induce compliance with gatt wto obligations

trade policy cross border externalities and lobbies do linked agreements enforce more cooperative outcomes abstract we analyze whether linking international cooperation in trade policy to environmental policy or other issues with nonpecuniary externalities promotes more cooperation in both policies or whether cooperation in one is strengthened at the expense of the other in the context of self enforcing agreements we show that if the policies are independent in the government s objective function then linkage promotes cooperation in one policy at the expense of the policy that is easier to enforce under no linkage however if the linked policies are not independent and if these policies are strategic complements then linkage can sustain more cooperation in both issues than no linkage the policies are strategic complements only if i the production externality has cross border effects ii the weight on the externality cost is high iii import competing lobbies are not powerful

the energy growth nexus reconsidered persistence and causality abstract this article applies a recent econometric framework to the analysis of the relationship between energy consumption and economic growth in the us which allows a joint study of causality and persistence we provide evidence suggesting a nonlinear relationship with a structural break in the most recent regime we find that gdp causes energy consumption and vice versa furthermore both series show persistence i e cyclical and natural components do not evolve independently thus policies oriented to the reduction of energy consumption could constrain economic growth and policy shocks can have permanent effects

a theory of managed trade this paper proposes a theory that predicts low levels of protection during periods of normal trade volume coupled with episodes of special protection when trade volumes surge this dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings high trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels therefore as the volume of trade expands the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check copyright 1990 by american economic association

making inferences from controlled income maintenance experiments nationally this paper addresses a question whose answer is essential for interpreting the results of such experiments if an experiment of limited duration is conducted under ideal conditions what can be inferred from the experimental results about behavior in a world where nit is adopted permanently by ideal conditions we mean that a individuals or households 2 in the experiment are conventional utility maximizers given the structure of the experiment and b the experiment is sufficiently well designed to permit the differential responses of individuals to be identified 3 the

when does tit for tat diplomacy in trade policy pay off in international relations short run incentives for non cooperation often dominate yet external institutions for enforcing cooperation are hampered by national sovereignty supposedly strengthening the role of selfenforcing mechanisms this paper examines their scope with a focus on contingent protection aka tit for tat in trade policy by highlighting various strategies in a linear partial equilibrium framework we show that retaliation of non cooperative behavior by limiting market access works as a disciplining device independently of supply and demand parameters our theoretical results are backed by empirical evidence that countries more frequently involved in wto mediated disputes entailing tit for tat strategies pursue on average more liberal trade regimes

renegotiation proof equilibria in repeated prisoners dilemma abstract in this note it is shown that the requirement of weak renegatiation proofness does not eliminate any subgame perfect equilibrium outcome of the repeated prisoner s dilemma specifically it is demonstrated that when players are sufficiently patient any feasible and individually rational outcome can be sustained by means of an equilibrium in which the punishing player always profits by carrying out the punishment

trade skirmishes and safeguards a theory of the wto dispute settlement process i propose a framework within which to interpret and evaluate the major reforms introduced to the gatt system in its transition to the wto in particular i examine the wto agreement on safeguards that has replaced the gatt escape clause article xix and the dispute settlement process dsp that resembles a court of law under the wto using this framework i interpret the weakening of the reciprocity principle under the agreement on safeguards as an attempt to reduce e ciency reducing trade skirmishes the dsp is interpreted as an impartial arbitrator that announces its opinion about the state of the world when a dispute arises among member countries i demonstrate that the reforms in the gatt escape clause should be bundled with the

auctioning countermeasures in the wto we offer a first formal analysis of auctioning retaliation rights within the wto we show that the auctions exhibit externalities among bidders and we characterize equilibrium bidder behavior under alternative auction formats if the violating country is prevented from bidding to retire the right of retaliation against it then the possibility of auction failure arises whereby no bids are made despite positive valuation by bidders if the violating country is instead permitted to bid then auction failure is precluded and indeed the right of retaliation is always retired we evaluate these different auction formats from normative revenue compliance efficiency standpoints

are preferential trade agreements with non trade objectives a stumbling block for multilateral liberalization in many preferential trade agreements ptas countries exchange not only reductions in trade barriers but also cooperation in non trade issues such as labor and environmental standards intellectual property etc we provide a model of ptas motivated by cooperation in non trade issues and analyze its implications for global free trade and welfare we find that such ptas increase the cost of multilateral tariff reductions and thus cause a stumbling block to global free trade this occurs because multilateral tariff reductions decrease the threat that can be used in ptas and thus the surplus that can be extracted from them by explicitly modeling the interaction between preferential and multilateral negotiations we derive a testable prediction and provide novel econometric evidence that supports the model s key prediction the welfare analysis shows that the current wto rules allowing this type of ptas may be optimal for economically large countries thus the model can predict the rules we observe we also analyze alternative rules that constitute a pareto improvement

recurrent trade agreements and the value of external enforcement abstract this paper presents a theory of dynamic trade agreements in which external institutions such as the wto play a central role in supporting credible enforcement in our model countries engage in ongoing negotiations and as a consequence cooperative agreements become unsustainable in the absence of external enforcement institutions by using mechanisms such as delays in dispute resolution and direct penalties enforcement institutions can restore incentives for cooperation despite the lack of coercive power the occurrence of costly trade disputes and the feasibility of mechanisms such as escape clauses depend on the degree to which enforcement institutions can verify and condition on events that may lead to trade disputes

international trade agreements between countries of asymmetric size abstract this paper analyzes how changes in the structure and environment of trade agreements between a small and a large country affect the efficient frontier of those self enforcing agreements and hence negotiation outcomes using the autarky punishment instead of the interior nash punishment may provide the small country with greater bargaining power negotiating direct transfers under free trade instead of reciprocal tariff reductions improves the worst possible negotiation outcome for the small country the existence of irreversible investment may strengthen weaken the small country s bargaining power under the interior nash autarky punishment scheme

size inequality coordination externalities and international trade agreements abstract developing countries now account for a significant fraction of world trade and two thirds of the membership of the world trade organization wto however many are still individually small and thus have a limited ability to bilaterally extract and enforce trade concessions from larger developed economies even though as a group they would be able to do so we show that this coordination externality generates asymmetric outcomes under agreements that rely on bilateral threats of trade retaliation such as the wto but not under agreements extended to include certain financial instruments in particular we find that an extended agreement generates improvements in global efficiency and equity if it includes the exchange of bonds prior to trading but not if it relies solely on ex post fines moreover a combination of bonds and fines generates similar improvements even if small countries are subject to financial constraints that prevent them from posting bonds

multilateral stability and efficiency of trade agreements a network formation approach we study the endogenous network formation of bilateral and multilateral trade agreements by means of hypergraphs and introduce the equilibrium concept of multilateral stability we consider multi country settings with a firm in each country that produces a homogeneous good and competes as a cournot oligopolist in each market under endogenous tariffs we find that the existence of a multilateral trade agreement is always necessary for the stability of the trading system and that the formation of preferential trade agreements is always necessary for achieving global free trade we also find that global free trade is efficient but not necessarily the only multilaterally stable trade equilibrium when countries are symmetric heterogeneous in terms of market size we derive conditions under which such a conflict between overall welfare efficiency and stability occurs

tariff bindings and bilateral cooperation on export cartels abstract despite the negative international externalities that they generate export cartels are legal in many countries we use a repeated game approach to analyze cooperation between a low income country lic and its high income country hic trade partner where the hic agrees to prevent its industry from organizing as an export cartel in return for a combination of improved market access i e a tariff reduction and a transfer from the lic if the lic is subject to a tariff binding say because of an existing trade agreement the transfer it pays to the hic increases and the scope for bilateral cooperation declines

will initiatives to promote hydroelectricity consumption be effective evidence from univariate and panel lm unit root tests with structural breaks abstract this paper examines whether initiatives to promote hydroelectricity consumption are likely to be effective by applying univariate and panel lagrange multiplier lm unit root tests to hydroelectricity consumption in 55 countries over the period 1965 2011 we find that for the panel as well as about four fifths of individual countries that hydroelectricity consumption is stationary this result implies that shocks to hydroelectricity consumption in most countries will only result in temporary deviations from the long run growth path an important consequence of this finding is that initiatives designed to have permanent positive effects on hydroelectricity consumption such as large scale dam construction are unlikely to be effective in increasing the share of hydroelectricity relative to consumption of fossil fuels