How Important Can the Non-Violation Clause Be for the GATT/WTO?

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: GATT, WTO, dispute resolution, non-violation doctrine

JEL Classification: F10, F13, K33