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WTO Dispute Determinants

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  • David J. Kuenzel

    (Department of Economics, Wesleyan University)

Abstract

A functioning enforcement mechanism is crucial to ensure the continued success of the GATT/WTO agreements. In this paper, I examine the WTO members’ dispute selection decisions to judge the effectiveness of the WTO’s enforcement institution, the Dispute Settlement Body. Previous research shows that measures of retaliatory capacity (GDP, trade volumes, export structure) correlate with the incidence of WTO disputes, but fails to account for a number of empirical facts, such as the steady drop in trade quarrels since the early 2000s. To explain the observed dispute pattern, I extend the WTO theory by incorporating a link between endogenous trade policy formation and agreement violation and dispute filing decisions. I show that countries are more likely to engage in trade disputes as complainants or defendants when they have a small “tariff overhang”, which represents the difference between bound tariffs (by WTO negotiations) and the actually applied tariffs. Lower tariff overhangs constrain WTO members’ policy flexibility to respond to adverse shocks, which I motivate in my model by sectoral productivity adjustments due to decreases in trade costs after successful trade negotiations. Guided by this theoretical framework, I present empirical evidence that tariff overhangs are an essential determinant of the WTO dispute pattern.

Suggested Citation

  • David J. Kuenzel, 2015. "WTO Dispute Determinants," Wesleyan Economics Working Papers 2015-002, Wesleyan University, Department of Economics.
  • Handle: RePEc:wes:weswpa:2015-002
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    Cited by:

    1. David J. Kuenzel, 2019. "Do trade flows respond to nudges? Evidence from the WTO’s Trade Policy Review Mechanism," Review of International Economics, Wiley Blackwell, vol. 27(3), pages 735-764, August.
    2. Kuenzel, David J., 2020. "WTO tariff commitments and temporary protection: Complements or substitutes?," European Economic Review, Elsevier, vol. 121(C).
    3. 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.
    4. Maggi, Giovanni & Staiger, Robert W., 2020. "Learning by ruling and trade disputes," Journal of International Economics, Elsevier, vol. 126(C).
    5. 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.

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    More about this item

    Keywords

    ATT/WTO; Trade Disputes; Tariff Overhangs;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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