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

Abstract

The “non-violation” clause of GATT is Exhibit A for the proposition that international trade agreements are incomplete contracts. According to the terms-of-trade theory of trade agreements, it underpins the success of the GATT/WTO's “shallow integration” approach. Yet the observed role of the non-violation complaint is minimal. We develop a model of non-violation claims in trade agreements, demonstrate that it predicts a minimal on-equilibrium-path role for non-violation claims under reasonable parameter restrictions, and show that the non-violation clause may nevertheless play an important off-equilibrium-path role in the GATT/WTO. (JEL D74, D86, F12, F13, K33)