The WTO Dispute Settlement System: A First Assessment from an Economic Perspective

Posted: 5 Sep 2000

See all articles by Monika Butler

Monika Butler

University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute)

Heinz Hauser

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research

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Abstract

We explore the incentives countries face in trade litigation within the new WTO Dispute Settlement System. Our analysis yields a number of interesting predictions. First, because sanctions are ruled out during the litigation process, the Dispute Settlement System does not preclude all new trade restrictions. However, the agenda-setting capacity of the complainant, including its right to force a decision, make trade restrictions less attractive than under the WTO's predecessor GATT. Second, the system's appellate review provides the losing defendant with strong incentives to delay negative findings, and both parties with a possibility to signal their determinacy in fighting the case. Third, a relatively weak implementation procedure potentially reinforces incentives to violate WTO trade rules. Fourth, bilateral settlements are more likely at an early stage in the process and are biased towards the expected outcome of the formal dispute settlement procedure. Empirical evidence based on a first data set of cases at an advanced stage of the litigation process provides qualitative support for our claims.

Keywords: World Trade Organization, dispute settlement, trade restrictions

JEL Classification: D74, F13, K41

Suggested Citation

Bütler, Monika and Hauser, Heinz, The WTO Dispute Settlement System: A First Assessment from an Economic Perspective. Available at SSRN: https://ssrn.com/abstract=235516

Monika Bütler (Contact Author)

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Heinz Hauser

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research ( email )

Dufourstr. 48
St. Gallen, 9000
Switzerland
41-71-224 23 36 (Phone)
41-71-224 22 98 (Fax)

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