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A Mechanism Design of Dispute Resolution Systems in a Regional-Free Trade Agreement

  • Dragan Miljkovic EMAIL logo and Miguel Gomez
Published/Copyright: October 15, 2013

Abstract

We examine the problem of mechanism design of how individual produce firms within NAFTA make their decisions to belong to the Dispute Resolution Corporation (DRC) when facing a set of criteria to which they previously agreed upon. We design a dominant strategy (the truth-telling) mechanism where both Pareto optimality and optimization of DRC’s welfare are achieved. If there are pivotal firms within the DRC, necessary assumptions made for such a mechanism to work cannot be all satisfied. Next, we compare the assumptions necessary for the mechanism to function and the current system for dispute resolution of the DRC. Casual empiricism and to-date existence of the DRC suggest the existence of pivotal firms.

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  1. 1

    Under the Canadian constitutional arrangements, such authority could only be granted to a federal board either through a change in the Canadian constitution or the establishment of cumbersome federal-provincial agreements, both of which were practically unachievable (Whitney 2011).

  2. 2

    This section is based on extensive personal interviews conducted in the period June 2010–July 2011 with individuals that played key roles in the process that led to the creation of the DRC and its evolution during the period 2000–2010. The interviewees included (name, title, affiliation, country): R. Carberry, Assistant Secretary, Treasury Board of Canada Secretariat, Ottawa, Canada; G. Chancey, G., Executive Director, Business Modernization, Canadian Food Inspection Agency, Ottawa, Canada; K. Clayton, K., Associate Administrator, Agricultural Marketing Service, U.S. Department of Agriculture, Washington D.C., U.S.; D. Dempster, President, Canadian Produce Marketing Association, Ottawa, Canada; R. Keeney, Deputy Administrator, Agricultural Marketing Service, Fruit and Vegetable Programs, U.S. Department of Agriculture, Washington DC, U.S.; J. Koller, J. Director, PACA Dispute Resolution Section, Agricultural Marketing Service, U.S. Department of Agriculture, Washington DC; U.S.; I. McKenzie, Executive Vice-President, Ontario Produce Marketing Association, Toronto, Canada; M. McInerney, Executive Vice-President, Western Growers Association, Irvine CA, U.S.; M. Paredes, Director, Grupo Lala, Mexico City, Mexico; F. Webber, Vice-President, Trading Assistance, Fruit and Vegetable Dispute Resolution Corporation, Ottawa, Canada; K. Whalen, Chief, Fair Trading Regulations, Agricultural Marketing Service, U.S. Department of Agriculture, Washington, DC., U.S.; S. Whitney, President, Fruit and Vegetable Dispute Resolution Corporation, Ottawa, Canada; H. Zohar-Picciano, Chief, Fresh Produce Section, Canadian Food Inspection Agency, Ottawa, Canada.

Published Online: 2013-10-15

©2013 by Walter de Gruyter Berlin / Boston

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