The GATT and Gradualism

Abstract

This paper shows how the institutional rules imposed on its signatories by the GATT created a strategic incentive for countries to liberalize gradually. Trade liberalization must be gradual, and free trade can never be achieved, if punishment for deviation from an agreement is limited to a `withdrawal of equivalent concessions' and if initial deviation from an agreement is also limited. The paper shows how (sufficiently patient) countries have an incentive to deviate in a limited way when operating under GATT dispute settlement procedures.