What Is Litigation in the World Trade Organization Worth?

41 Pages Posted: 12 Dec 2011 Last revised: 30 Jan 2015

Michael M. Bechtel

Washington University in St. Louis

Thomas Sattler

University of Geneva - Department of Political Science and International Relations

Date Written: December 3, 2013

Abstract

Conventional wisdom holds that the creation of international, court-like institutions helps countries to peacefully settle trade conflicts, thereby enhancing overall welfare. Many have argued, however, that these institutions remain ultimately ineffective because they merely reflect the distribution of power in the anarchic international system. We argue that international litigation provides economic spillovers that create opportunities for judicial freeriding and explore empirically how litigation in the World Trade Organization affects bilateral trade between countries involved in a trade dispute. We use a matching approach to compare the dynamics of trade flows between countries that experienced a panel ruling with trade relations of observably similar country pairs that did not experience a ruling. Based on this comparison we find that sectoral exports from complainant countries to the defendant increase by about $7.7 billion in the three years after a panel ruling. However, countries that have proactively filed a complaint and carried the main costs of litigation do not systematically gain more than less active third parties that merely joined an existing trade dispute. We conclude that international judicial institutions can provide positive economic externalities and may thereby lead to a less power-based distribution of the gains from trade.

Keywords: International institutions, trade disputes, trade barriers, WTO, positive externalities

JEL Classification: P16, F13, F4

Suggested Citation

Bechtel, Michael M. and Sattler, Thomas, What Is Litigation in the World Trade Organization Worth? (December 3, 2013). International Organization, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1971306 or http://dx.doi.org/10.2139/ssrn.1971306

Michael M. Bechtel (Contact Author)

Washington University in St. Louis ( email )

Campus Box 1063
One Brookings Drive
Saint Louis, MO 63130-4899
United States

Thomas Sattler

University of Geneva - Department of Political Science and International Relations ( email )

40 boulevard du Pont d'Arve
Genève 4, Geneve CH-1211
Switzerland

HOME PAGE: http://www.thomassattler.org

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