The GATT and Gradualism
Working Paper No. 06-W19
Ben Zissimos
ABSTRACT [article]
This paper shows how the institutional rules imposed on its
signatories by the GATT created a strategic incentive for countries to
liberalize gradually. Trade liberalization must be gradual, and free trade
can never be achieved, if punishment for deviation from an agreement is
limited to a `withdrawal of equivalent concessions' and if initial
deviation from an agreement is also limited. The paper shows how
(sufficiently patient) countries have an incentive to deviate in a limited
way when operating under GATT dispute settlement procedures.
Keywords and Phrases: Free trade, gradual trade liberalization, strategic
interactions, trade agreement, welfare
JEL Classification Numbers: F02, F13, F15, C73