WTO Dispute Determinants

David Kuenzel

No 2015-002, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

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.

Keywords: ATT/WTO; Trade Disputes; Tariff Overhangs (search for similar items in EconPapers)
JEL-codes: F13 F51 F53 F55 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015-04
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: WTO dispute determinants (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2015-002

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