| dc.description.abstract | I model the World Trade Organization as an impartial arbitrator with no enforcement power which issues public signals correlated with the state of the world in the disputing countries. Such public signals, by mitigating the information asymmetry among the negotiating governments, make it easier to write an incentive-compatible agreement. The reciprocity principle embodied in the GATT Article XIX ensures an incentive compatible agreement by allowing occasional trade skirmishes. The WTO Safeguard Agreement, when supported with impartial arbitration, can improve political welfare by curbing trade skirmishes while keeping the incentive constraints in check. Impartial arbitration improves the enforceability of trade agreements without providing external enforcement. | |
