The cost of wiggle-room : on the use of flexibility in international trade
      agreements

Pelc, Krzysztof J.

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Pelc, Krzysztof J.

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Thesis (Ph.D.)--Georgetown University, 2009.; Includes bibliographical references.; Text (Electronic thesis) in PDF format. States join international institutions because they derive benefits from making binding commitments to each other. Concurrently, all states have an interest in breaching these commitments, especially following exogenous shocks not provided for by the designers of the treaty. Flexibility mechanisms thus function as "pressure valves" to allow for temporary loosening of the ties that bind. This dissertation addresses a number of puzzles surrounding the provision and use of flexibility in international trade agreements such as the General Agreement on Tariffs and Trade/ World Trade Organization (GATT/WTO): First, if some flexibility is beneficial, but too much renders an agreement prone to abuse, how is equilibrium attained? Secondly, what explains why some countries value flexibility more than others? And thirdly, what are the welfare costs of flexibility? I find that executives in states with diffuse domestic power set aside less flexibility for themselves, as a way of limiting the likelihood of its abuse by powerful sub-state actors. Conversely, highly autonomous governments can afford to derive the full benefits of flexibility with little of the associated costs. I also show how some types of permanent flexibility--as exhibited by "binding overhang"--lead to high welfare costs as evidenced by their dampening effect on world trade. One conclusion permeates this study: some policy space in international agreements may be necessary, but it comes at a cost, and tends to reinsert power politics into institutions whose objective is often precisely the opposite.