Monday, October 14, 2013

WTO disputes, trade and strategic litigation?

An interesting link between WTO disputes and the growth of trade is analysed in a paper titled "Do WTO disputes actually increase trade?". The paper finds:
"We find that WTO disputes do not, on average, increase a country’s imports of the products at issue. We find only very specific effects of disputes based on the dispute outcome and issue-area. We find significant variation across countries in their responsiveness to disputes, yet that most common explanations cannot account for this variation. This article highlights and begins to fill a significant gap in our understanding of the purpose of the WTO and its effects on trade."
The paper concludes:
"This paper presents an important finding: the effect of WTO disputes on imports at issue is, at best, inconsistent. In the aggregate, disputes are not associated with a statistically significant increase in imports. Looking at particular dispute outcomes and issue areas, only certain types of disputes have been associated with increased trade, and many have resulted in decreases. More- over, certain respondents are more “responsive” to disputes than others. Disputes against some countries have resulted in increased imports, while disputes against others have failed to do so. We do not find strong evidence of a systematic explanation for this variation."
While the relationship between a dispute and the impact it has on trade is far more complex, I found two reasons noted in the paper as to why countries probably file WTO cases interesting - rule clarifying and setting precedence for one's advantage.
"It may be, for instance, that the benefit of dispute settlement rests entirely on its rule-clarifying function. In such a telling, a dispute’s resolution leads to a convergence of expectations over country behavior. If we are to believe that most noncompliance amounts to a misunderstanding of the meaning of rules (Chayes and Chayes, 1993), the main benefit of a dispute may be to clarify the meaning of the underlying law. This benefit would be felt throughout the institution, as countries adjust their behavior to take into account that, e.g. the use of safeguards is now known to require the demonstration of “unforeseen developments”.If this is the case, however, our null finding over the effect on trade of mutually agreed solutions is of special concern. Indeed, settlements have no clarifying effect, since their content is usually kept largely private. When taken together with the finding that settlements have no average effect on trade, there remains little to recommend settlements. This is especially striking given the literature’s contention that MAS are where most of the action occurs in dispute settlement. 
Related to the idea of rule-clarification, it could be that dispute settlement is mostly an exercise in changing the meaning of the rules to one’s advantage. Perhaps countries file to set favorable precedents about matters of concern to them. Although the WTO features no formally binding precedent, or stare decisis, scholars largely agree that something akin to de facto stare decisis actually takes place (Bhala, 1998), where rulings do constrain the rulings of judges in subsequent cases. .."
Strategic litigation? 

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