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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.

Suggested Citation

  • Monika BÜTLER & Heinz HAUSER, 2000. "The WTO Dispute Settlement System : A First Assessment from an Economic Perspective," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.02, Université de Lausanne, Faculté des HEC, DEEP.
  • Handle: RePEc:lau:crdeep:00.02
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    Cited by:

    1. Chau, Nancy H. & Färe, Rolf, 2011. "Shadow pricing market access: A trade benefit function approach," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1631-1663, July.
    2. Fritz Breuss, 2004. "WTO Dispute Settlement: An Economic Analysis of Four EU–US Mini Trade Wars—A Survey," Journal of Industry, Competition and Trade, Springer, vol. 4(4), pages 275-315, December.
    3. Horn, Henrik & Mavroidis, Petros C., 2006. "A Survey of the Literature on the WTO Dispute Settlement System," Working Paper Series 684, Research Institute of Industrial Economics.
    4. 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.
    5. 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 (AIUB), Office of Research and Publications (ORP), revised Jan 2008.
    6. Kym Anderson, 2016. "Contributions Of The Gatt/Wto To Global Economic Welfare: Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 56-92, February.
    7. repec:lan:wpaper:859 is not listed on IDEAS
    8. repec:lan:wpaper:872 is not listed on IDEAS
    9. 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.
    10. Pao-Li Chang, 2004. "The Politics of WTO Enforcement Mechanisms," Econometric Society 2004 Australasian Meetings 117, Econometric Society.
    11. 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.
    12. Thomas A. Zimmermann, 2005. "WTO Dispute Settlement at Ten: Evolution, Experiences, and Evaluation," International Trade 0504003, EconWPA.
    13. Fritz Breuss, 2004. "WTO Dispute Settlement: An Economic Analysis of four EU-US Mini Trade Wars," WIFO Working Papers 231, WIFO.
    14. 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.
    15. 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.
    16. Lee, Jiwon & Wittgenstein, Teresa, 2017. "Weak vs. Strong Ties: Explaining Early Settlement in WTO Disputes," ILE Working Paper Series 7, University of Hamburg, Institute of Law and Economics.
    17. Wilfred J. Ethier, "undated". "Punishment and Dispute Settlement in Trade Agreements," EPRU Working Paper Series 01-14, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    18. 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).
    19. Wohlschlegel, Ansgar, 2014. "The Appeals Process and Incentives to Settle," MPRA Paper 59424, University Library of Munich, Germany.
    20. repec:lan:wpaper:860 is not listed on IDEAS
    21. repec:spr:manint:v:47:y:2007:i:5:d:10.1007_s11575-007-0042-0 is not listed on IDEAS
    22. 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.
    23. 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).
    24. Frischmann Brett M. & Hartigan James C., 2011. "Compliance Institutions in Treaties," Review of Law & Economics, De Gruyter, vol. 7(1), pages 86-117, May.
    25. Fabien BESSON & Racem MEHDI, "undated". "Is WTO Dispute Settlement System Biased Against Developing Countries? An Empirical Analysis," EcoMod2004 330600022, EcoMod.

    More about this item

    Keywords

    World Trade Organization; dispute settlement; trade restrictions;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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