Domestic Policies, Hidden Protection and the GATT/WTO

45 Pages Posted: 5 Sep 2012

See all articles by Claustre Bajona

Claustre Bajona

Ryerson University

Josh Ederington

University of Kentucky - Department of Economics

Date Written: September 3, 2012


As tariff barriers have fallen worldwide, regulation of domestic policy has become increasingly important in international trade agreements. This has led to the emergence of a theoretical literature addressing the integration of perfectly observable domestic policy into trade agreements. However, the assumption that domestic policy is perfectly observable is problematic since the interpretation and enforcement of domestic policy statutes is often non-transparent. Thus, it may be difficult to determine whether lack of market access is due simply to random shocks or to the use of domestic policies as hidden trade barriers. In this paper, we model international coordination over trade and domestic policy when domestic policy is private information and thus can be used as a form of "hidden protection." We show that the optimal design of an efficient agreement depends greatly on whether domestic policy is observable or unobservable.

Keywords: trade policy, environmental standards, international agreements

JEL Classification: F1, F13, K33, H2

Suggested Citation

Bajona, Claustre and Ederington, Josh, Domestic Policies, Hidden Protection and the GATT/WTO (September 3, 2012). Available at SSRN: or

Claustre Bajona

Ryerson University ( email )

350 Victoria Street
Toronto, Ontario M5B 2K3
416-979-5000 x4258 (Phone)

Josh Ederington (Contact Author)

University of Kentucky - Department of Economics ( email )

335 Business and Economics Building
Lexington, KY 40506
United States

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