An Empirical Analysis of Wealth Disparities in WTO Disputes: Do Poorer Countries Suffer from Strategic Delay During Dispute Litigation?

Abstract

A long-standing debate questions whether the World Trade Organization’s (“WTO”) formal dispute settlement procedures level the playing field for lower income countries in international trade disputes, or instead, merely give opportunistic and sophisticated countries complex rules that they can use to exploit these lower income countries. Using a database of cases decided under the WTO, this article examines whether there is evidence that developing countries suffer strategic delay when they sue developed countries. Strategic delay is a crucial consideration in WTO proceedings because, unlike in typical litigation, the WTO dispute settlement process does not offer backward-looking remedies. As a result, a complainant will almost always want to bring a dispute to completion as soon as possible, and a respondent will almost always want to delay resolution.

We find no evidence that lower income countries are disadvantaged by delay during the litigation phase of the WTO’s dispute settlement process. To the extent that there is any trend, it appears that litigation actually progresses faster when lower income countries initiate it against rich countries, than when rich countries initiate disputes against lower income countries.

After fact-finding litigation is completed, however, lower income complainants suffer significantly more delay before the dispute moves to the WTO’s compliance procedures. Crucially, lower income countries do not experience this delay when they use a more formal, but optional, WTO procedure for determining the total time for compliance. This phenomenon strongly suggests that lower income nations may face strategic delay in open negotiations with their more powerful counterparts, but that the disadvantage is mitigated, or even eliminated, in the context of formal WTO procedures.

Keywords: WTO, Trade Disputes, Empirical Analysis, Strategic Delay

JEL Classification: F13, K33