Paper #914

Título:

On the role of retaliation in trade agreements

Autores:

Alberto Martin y Wouter Vergote

Data:

Junio 2005

Resumen:

This paper analyzes the role of retaliation in trade agreements. It shows that, in the presence of private information, retaliation can always be used to increase the welfare derived from such agreements by the participating governments. In particular, it is shown that retaliation is a necessary feature of any efficient equilibrium. We argue that retaliation would not be necessary if governments could resort to international transfers or export subsidies to compensate for terms-of-trade externalities. Within the current world trading system, though, in which transfers are seldom observed whereas export subsidies are prohibited, the use of the remaining trade instruments in a retaliatory fashion might be optimal. The model is used to interpret the retaliatory use of antidumping observed in the last decades, and the proliferation of these measures relative to other trade remedies.

Palabras clave:

Tariffs, Retaliation, Asymmetric Information, WTO, Antidumping Duties

Códigos JEL:

C72, D82, F13

Área de investigación:

Macroeconomía y Economía Internacional

Publicado en:

Journal of International Economics, 76 (1) 2008, 61-77

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