The Economics Structure of Renegotiation and Dispute Resolution in the Wto/Gatt System

Posted: 4 Apr 2002

See all articles by Warren F. Schwartz

Warren F. Schwartz

Georgetown University Law Center

Alan Sykes

Stanford University - Law School

Date Written: 2002

Abstract

The treaty creating the WTO replaced the GATT dispute resolution system, which contained no formal sanctions for breach of agreement as a practical matter, with a system that results in centrally authorized sanctions against recalcitrant violators of WTO trade agreements. We examine the important features of the new system, and argue that the institutionalization of a sanctioning mechanism was not motivated by a perceived need to increase the penalty. In particular, the GATT system relied on unilateral retaliation and reputation to police the bargain, and toward its end unilateral retaliation became excessive, interfering with opportunities for efficient breach. The WTO mechanism for arbitrating the magnitude of proposed sanctions is the major innovation under WTO law, and ensures that sanctions are not set too high.

Suggested Citation

Schwartz, Warren F. and Sykes, Alan, The Economics Structure of Renegotiation and Dispute Resolution in the Wto/Gatt System (2002). Journal of Legal Studies, Vol. 31, No. 1, Part 2. Available at SSRN: https://ssrn.com/abstract=302823

Warren F. Schwartz

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9101 (Phone)
202-662-9411 (Fax)

Alan Sykes (Contact Author)

Stanford University - Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

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