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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. 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.
  2. 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.
  3. Pao-li Chang, 2007. "The Evolution and Utilization of the GATT/WTO Dispute Settlement Mechanism," Trade Working Papers 22062, East Asian Bureau of Economic Research.
  4. Thomas A. Zimmermann, 2005. "WTO Dispute Settlement at Ten: Evolution, Experiences, and Evaluation," International Trade 0504003, EconWPA.
  5. Fritz Breuss, 2004. "WTO Dispute Settlement: An Economic Analysis of four EU-US Mini Trade Wars," WIFO Working Papers 231, WIFO.
  6. 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).
  7. 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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