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The WTO Dispute Settlement System : A First Assessment from an Economic Perspective

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  • Monika BÜTLER
  • Heinz HAUSER

Abstract

We explore the incentives countries face in trade litigation within the new WTO Dispute Settlement System. Our analysis yields a number of interesting predictions. First, because sanctions are ruled out during the litigation process, the Dispute Settlement System does not preclude all new trade restrictions. However, the agenda-setting capacity of the complainant, including its right to force a decision, make trade restrictions less attractive than under the WTO's predecessor GATT. Second, the system's appellate review provides the losing defendant with strong incentives to delay negative findings, and both parties with a possibility to signal their determinacy in fighting the case. Third, a relatively weak implementation procedure potentially reinforces incentives to violate WTO trade rules. Fourth, bilateral settlements are more likely at an early stage in the process and are biased towards the expected outcome of the formal dispute settlement procedure. Empirical evidence based on a first data set of cases at an advanced stage of the litigation process provides qualitative support for our claims.

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Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 00.02.

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Length: 29 pages
Date of creation: Feb 2000
Date of revision:
Publication status: Published in Journal of Law, Economics and Organization, vol. 16 (2), Fall 2000, pp. 503-533
Handle: RePEc:lau:crdeep:00.02

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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
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Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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Keywords: World Trade Organization; dispute settlement; trade restrictions;

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Cited by:
  1. Alexander Keck, 2004. "WTO Dispute Settlement: What Role for Economic Analysis? A Commentary on Fritz Breuss," Journal of Industry, Competition and Trade, Springer, vol. 4(4), pages 365-371, December.
  2. Pao-Li Chang, 2002. "The Evolution and Utilization of the GATT/WTO Dispute Settlement Mechanism," Working Papers 475, Research Seminar in International Economics, University of Michigan.
  3. Ziaul Abedin & Mohammad Ali Tareq, 2008. "Trends of Trade Disputes During the WTO Regime," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2008-04, American International University-Bangladesh, Office of Research and Publications (ORP), revised Jan 2008.
  4. Horn, Henrik & Mavroidis, Petros C, 2006. "A Survey of the Literature on the WTO Dispute Settlement System," CEPR Discussion Papers 6020, C.E.P.R. Discussion Papers.
  5. Pao-Li Chang, 2004. "The Politics of WTO Enforcement Mechanisms," Econometric Society 2004 Australasian Meetings 117, Econometric Society.
  6. Chau, Nancy H. & Fare, Rolf, 2008. "Shadow Pricing Market Access: A Trade Benefit Function Approach," Discussion Papers 6218, University of Bonn, Center for Development Research (ZEF).
  7. Fritz Breuss, 2004. "WTO Dispute Settlement: An Economic Analysis of four EU-US Mini Trade Wars," WIFO Working Papers 231, WIFO.
  8. Talya Bobick & Alastair Smith, 2013. "The impact of leader turnover on the onset and the resolution of WTO disputes," The Review of International Organizations, Springer, vol. 8(4), pages 423-445, December.
  9. Francois, Joseph & Horn, Henrik & Kaunitz, Niklas, 2008. "Trading Profiles and Developing Country Participation in the WTO Dispute Settlement System," Working Paper Series 730, Research Institute of Industrial Economics.
  10. Thomas A. Zimmermann, 2005. "WTO Dispute Settlement at Ten: Evolution, Experiences, and Evaluation," International Trade 0504003, EconWPA.
  11. Javelosa, Josyline C. & Schmitz, Andrew, 2006. "Costs and Benefits of a WTO Dispute: Philippine Bananas and the Australian Market," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 7(1).
  12. Heinz Hauser & Alexander Roitinger, 2002. "A Renegotiation Perspective on Transatlantic Trade Disputes," University of St. Gallen Department of Economics working paper series 2002 2002-09, Department of Economics, University of St. Gallen.
  13. R A Read, 2005. "Trade dispute settlement mechanisms: the WTO dispute settlement understanding in the wake of the GATT," Working Papers 564824, Lancaster University Management School, Economics Department.

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