This paper develops a model of the WTO dispute settlement process (DSP) to study the recent proposal by legal scholars to subsidize litigation costs. The high cost of litigation, so the argument, is a major obstacle for developing countries to using the DSP to enforce developed countries’ compliance with WTO rules. The paper shows that this proposal may be misguided. In particular, a reduction of litigation costs may lead large countries to impose larger trade impediments where before they may have raised barriers only a little. Thus, a cost reduction may even weaken the smaller countries’ position in the DSP. Moreover, the model sheds light on the structure of the dark figure of un-accused offenses, suggesting that the observed record of disputes notified to the WTO is systematically biased.
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Kyle Bagwell & Robert W. Staiger, 1999.
"An Economic Theory of GATT,"
American Economic Review,
American Economic Association, vol. 89(1), pages 215-248, March.
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Kennan, John & Riezman, Raymond, 1988.
"Do Big Countries Win Tariff Wars?,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
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