Trade Agreements, Incomplete Contracts and Offshoring

There are many puzzling features of real-world trade agreements that are hard to square with a complete contracts perspective. These relate to the design of rules, the settlement of disputes and the prominence of renegotiation.

In his first lecture while staying at CES, Robert W. Staiger explored whether the design and operation of trade agreements can be understood from an incomplete contracts perspective. In his second lecture, Mr Staiger focused on explaining the outcomes of trade disputes.

His third lecture, in turn, started with a fundamental question for modern research on commercial policy: What is the purpose of international trade agreements? He described two broad views: internalizing international policy externalities, and helping governments make commitment to their own private sectors. The first view dominates in accounting for observed features of trade agreements; but there remains the question of what form the international externality takes. If the form of the externality changes, must trade agreements change to remain successful?

Mr Staiger emphasised two particular aspects. First, the nature of international price determination is a key determinant of the nature of the international externality, and it can have a profound impact on the design of an effective trade agreement. Second, the rise of offshoring may alter the design of effective trade agreements through its impact on the nature of price determination. Mr Staiger’s CES Lectures were held on March 25, 26 and 27.

Robert W. Staiger is the Stockwell Professor of Economics in the Department of Economics at the University of Wisconsin. He graduated from Williams College in 1980 and received his PhD from the University of Michigan in 1985. He was an Assistant Professor of Economics at Stanford University from 1985 through 1991, and was promoted at Stanford to tenured Associate Professor in 1991. In 1993 Mr Staiger joined the University of Wisconsin Economics Department, where he remained until his return to Stanford in 2006 to become the Holbrook Working Professor in Commodity Price Studies in the Department of Economics. In 2011 he rejoined the Economics Department at Wisconsin as the Stockwell Professor of Economics, and during the 2013/14 academic year, he is the Roth Family Distinguished Visiting Scholar at Dartmouth College. His research focuses on international trade policy, rules and institutions, with a particular emphasis on the economics of the GATT/WTO.

Robert Staiger is a Fellow of the Econometric Society, and currently serves as a Research Associate of the National Bureau of Economic Research, and as a Reporter for the American Law Institute in its study of Principles of Trade Law: The World Trade Organization. In addition, Mr Staiger served as Co-Editor of the Journal of International Economics (JIE) from 1995 through 2009 and became JIE Editor in January 2010. Together with Kyle Bagwell, he is currently serving as Editor of The Handbook of Commercial Policy (Elsevier), due out in 2016.