Cap and Escape in Trade Agreements

• 成果类型: Article
• 署名作者: Beshkar, Mostafa; Bond, Eric W.
• 署名单位: Indiana University System; Indiana University Bloomington; Vanderbilt University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20160218
• 发表日期: 2017
• 页码: 171-202
• 关键词: Optimal delegation; CONTRACTS; TARIFFS; RENEGOTIATION; countries; POLICY

摘要

We propose a model of flexible trade agreements in which verifying the prevailing contingencies is possible but costly. Two types of flexibility emerge: contingent protection, which requires governments to verify the state of the world, and discretionary protection, which allows governments to set tariffs unilaterally. The structure of the GATT/WTO agreement provides these two types of flexibility through a mechanism that we call Cap and Escape. Governments may choose tariffs unilaterally below the negotiated cap, but escaping from the cap requires state verification. We show that this framework explains key features of the GATT/WTO agreements, including the substantial variation across sectors and countries in the level of negotiated tariffs, and the rate at which different flexibility measures are used.