ORDERLY MARKETING ARRANGEMENT IN THE CONTEXT OF THE GATT REGIME*

When a country faces a sudden surge of import, GATT allows it to impose an import quota to protect its domestic import-competing firms. Nevertheless, various types of OMAs (orderly marketing arrangements) are often utilized instead of import quotas. This paper shows that the threat of the exporting country's retaliation approved by GATT makes it advantageous for both the exporting and importing countries to establish an OMA. By designing an OMA under which its deadweight loss is appropriately distributed to them, they avoid the retaliation approved by GATT which causes an additional deadweight loss.