The Political Economy Of Safeguard Measures

Nowadays, the traditional trade protectionism is chosen less and less by every government. In contrast to this, anti-dumping, anti-subsidy and safeguard measures which are under WTO framework are more and more valued by all trading nations. So safeguard measures becomes to a very important policy. If one government can't make a proper decision, this country must be failed to compete with other countries in the field of international trade. This thesis will use game theory to analyze the safeguard measures and will leading-in political economy to explain why and how safeguard measure works.The paper analyzes international and domestic political economy of safeguard measures by using game theory. The author builds a Gounod model and an evolutional gaming model to explain what will happens to two countries' trading profits when one of the two implements safeguard measures. Then the author used a 2 section static gaming model to explain the role of the interest groups.The author found that one country started safeguard measures to another, the first country will get more trading profits. But the other one must face the reverse situation, so it will start safeguard measures too. To start safeguard measures or not determine by the other country's grasping level of the whole market. If the 2^nd country has totally occupied the market, the 1^st country should start the safeguard measures. If the 2^nd country's grasping level is low, the 1^st country ought not to start the policy.In the domestic environment, the interest groups play a very important role to the determination of the safeguard measures. It is one of 3 basic elements, the other 2 is the government and the voter. They are all asking for their own interest. The final balance decides the policy of the safeguard measure. According to the conclusion, the author proposes relevant suggestions.