Impact of World Trade Organization (WTO) Dispute Filings on Trade Performance: Testing of Optimal Initiation Theory

Iqra Yaseen () and Sofi Mohammad Shafi ()
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Iqra Yaseen: Memorial Degree College, Department of Commerce, Government Sheikh-Ul-Alam
Sofi Mohammad Shafi: Islamic University of Science and Technology, Department of Economics, School of Business Studies

A chapter in Business and Sustainable Development in a Globalized and Digitalized Era, 2026, pp 302-321 from Springer

Abstract: Abstract Trade disputes incur considerable costs on bilateral trade, particularly affecting developing nations that interact with developed markets. An increased frequency of dispute filings, although aimed at upholding trade regulations, can lead to diminished trade volumes and economic benefits. The intensity of a country’s dispute activity within the WTO Dispute Settlement System, referred to as dispute depth, has been demonstrated to affect trade results. This research builds on prior investigations by integrating data up to the year 2024 to assess the persistence of previously identified trends over time. Utilizing a panel comprising 30 representative member countries of the WTO from 1995 to 2024, and applying an enhanced structural gravity model characterized by Poisson Pseudo Maximum Likelihood with high-dimensional fixed effects (PPMLHDFE), the findings reaffirms the earlier notion that an increase in dispute depth negatively impacts bilateral trade between involved parties. Simulation outcomes suggest that WTO members can optimize trade results by limiting annual dispute filings to a maximum of three. These insights furnish updated empirical guidance for policymakers who aim to reconcile trade enforcement with economic advantages and present evidence for strategic management of disputes in the dynamic context of global trade.

Keywords: WTO; Dispute settlement; Bilateral trade; Dispute depth; Gravity model; PPMLHDFE (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 F40 F51 F53 F55 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-032-29346-6_15

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DOI: 10.1007/978-3-032-29346-6_15

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