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Trade Agreements and Enforcement: Evidence from WTO Dispute Settlement

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  • Bown, Chad P.
  • Reynolds, Kara M.

Abstract

This paper examines implications of the terms-of-trade theory for the determinants of outcomes arising under the enforcement provisions of international agreements. Like original trade agreement negotiations, we model formal trade dispute negotiations as potentially addressing the terms-of-trade externality problem that governments implement import protection above the globally efficient level so as to shift some of the policy's costs onto trading partners. We first extend earlier theoretical models from trade agreement accession negotiations to the setting of enforcement negotiations, and the resulting theory guides our empirical assessment. We use instrumental variables to estimate the model on trade volume outcomes from WTO disputes over 1995-2009. Our evidence is consistent with theoretical predictions that larger import volume outcomes are associated with products that have smaller increases to foreign exporter-received prices (terms-of-trade losses to the importer) as a result of the dispute, larger pre-dispute import volumes, larger import demand elasticities, and smaller foreign export supply elasticities. Dispute settlement outcome differences are also explained by variation in institutionally-motivated measures of retaliation capacity and the severity of the free rider problem associated with foreign exporter concentration.

Suggested Citation

  • Bown, Chad P. & Reynolds, Kara M., 2015. "Trade Agreements and Enforcement: Evidence from WTO Dispute Settlement," CEPR Discussion Papers 10571, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10571
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Petros C. Mavroidis, 2016. "Dispute Settlement in the WTO. Mind over Matter," RSCAS Working Papers 2016/04, European University Institute.
    2. Conconi, Paola & DeRemer, David R. & Kirchsteiger, Georg & Trimarchi, Lorenzo & Zanardi, Maurizio, 2017. "Suspiciously timed trade disputes," Journal of International Economics, Elsevier, vol. 105(C), pages 57-76.
    3. Murtinu, Samuele & Scalera, Vittoria G., 2016. "Sovereign Wealth Funds' Internationalization Strategies: The Use of Investment Vehicles," Journal of International Management, Elsevier, vol. 22(3), pages 249-264.
    4. Kuenzel, David J., 2017. "WTO dispute determinants," European Economic Review, Elsevier, vol. 91(C), pages 157-179.
    5. Moonhawk Kim, 2016. "Enduring trade disputes: Disguised protectionism and duration and recurrence of international trade disputes," The Review of International Organizations, Springer, vol. 11(3), pages 283-310, September.
    6. Bouët, Antoine & Metivier, Jeanne, 2017. "Is the WTO dispute settlement procedure fair to developing countries?," IFPRI discussion papers 1652, International Food Policy Research Institute (IFPRI).

    More about this item

    Keywords

    dispute settlement; terms of trade; trade agreements; WTO;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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