Why are Safeguards Needed in a Trade Agreement?

29 Pages Posted: 20 Sep 2006

See all articles by Meredith Crowley

Meredith Crowley

University of Cambridge - Faculty of Economics

Date Written: July 2006

Abstract

This paper reviews the theoretical and empirical literature on the use of safeguards in a trade agreement. It then analyzes the available data on the use of safeguards by WTO members to examine two hypotheses in the economics literature, that safeguards improve welfare by facilitating tariff reductions and that safeguards improve welfare by providing insurance against adverse economic shocks. I find that countries which undertook larger tariff reductions during the Uruguay Round conducted more safeguards investigations after the WTO was established. However, this result is not robust across all specifications of the model and should not be regarded as definitive. I find no evidence to support the hypothesis that safeguards improve welfare by providing insurance. The empirical analysis rejects the hypothesis of a relationship between safeguards and aggregate uncertainty.

Keywords: safeguards, trade agreements, WTO

JEL Classification: F13, F53, K33

Suggested Citation

Crowley, Meredith, Why are Safeguards Needed in a Trade Agreement? (July 2006). Federal Reserve Bank of Chicago Working Paper No. 2006-06, Available at SSRN: https://ssrn.com/abstract=931215 or http://dx.doi.org/10.2139/ssrn.931215

Meredith Crowley (Contact Author)

University of Cambridge - Faculty of Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

HOME PAGE: http://https://meredithcrowley.weebly.com/

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