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Tit-for-tat in trade policies: nothing but a fest for vested interests?

Published online by Cambridge University Press:  11 March 2015

BARBARA DLUHOSCH
BARBARA DLUHOSCH*
Affiliation:
Department of Economics, Helmut-Schmidt-University/University of the Federal Armed Forces Hamburg, Germany
*
*Email: [email protected]
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Abstract

Tit-for-tat (TFT) in trade policies is a common practice. It is even enshrined in Article 22.4 of the WTO's dispute settlement process within multilateral trade integration. As such, it is a well-recognized means for promoting cooperation and for enforcing compliance with a common set of rules or institutions. However, there is equally widespread concern that a strategy of TFT degenerates into a prisoner's dilemma, in particular because of special interests ill-using it as a springboard for advancing protectionist measures and beggar-thy-neighbor policies. This paper provides a novel evolutionary perspective on TFT in trade policy regimes in that it tracks the role of special interests by parameterizing their leverage on strategies. Doing so, it provides new insights on the political economy of TFT in international institutions. Accordingly, the set of parameters for which a prisoner's dilemma emerges shrinks rather than widens, even with powerful domestic interest groups sharing a stake in protection.

Type
Research Article
Information
Journal of Institutional Economics , Volume 12 , Issue 1 , March 2016 , pp. 217 - 239
Copyright
Copyright © Millennium Economics Ltd 2015 

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