Multinational Firms, Value Chains, and Trade Disputes: Explaining Dispute Onset at the World Trade Organization

27 Pages Posted: 8 May 2018  

Aydin Yildirim

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Arlo Poletti

Università degli Studi di Trento

Tyson Chatagnier

University of Houston - Department of Political Science

Dirk De Bièvre

Independent

Date Written: April 2018

Abstract

In this paper we aim to explain World Trade Organization (WTO) members’ decision to initiate a dispute at the WTO. Since many potential violations of WTO law remain unchallenged, we explore the conditions under which WTO members complain about only some allegedly WTO-incompatible policies, while leaving a large majority of them unchallenged. While there may be different reasons why governments choose to initiate certain disputes, we are especially interested in the relationship between potential and actual trade disputes on the one hand and the degree of integration into so-called global value chains (GVCs) on the other. We demonstrate that decision-makers are more likely to try and eliminate barriers to cross-border trade by tabling WTO complaints when facing pressures to do so by firms and sectors highly integrated into such GVCs. Potential complainants’ policymakers act strategically when considering whether to initiate a formal dispute. Responding to demands of firms and sectors that are highly integrated in GVCs allows complainants’ policymakers to secure the support of politically powerful domestic constituencies while simultaneously minimizing the administrative burdens and the potential negative externalities for bilateral diplomatic relations that a WTO dispute can bring about. We test our hypothesis by examining data from the US using a binomial logistic regression and Cox proportional hazard model and find that trade barriers are both more likely to be filed as disputes and quicker in being tabled at the WTO in sectors highly integrated into GVCs, while controlling for other factors.

Keywords: world trade organization, global value chains, dispute initiation, multinational firms

Suggested Citation

Yildirim, Aydin and Poletti, Arlo and Chatagnier, Tyson and De Bièvre, Dirk, Multinational Firms, Value Chains, and Trade Disputes: Explaining Dispute Onset at the World Trade Organization (April 2018). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2018/21. Available at SSRN: https://ssrn.com/abstract=3169877 or http://dx.doi.org/10.2139/ssrn.3169877

Aydin Yildirim (Contact Author)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Arlo Poletti

Università degli Studi di Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

Tyson Chatagnier

University of Houston - Department of Political Science ( email )

TX 77204-3011
United States

Dirk De Bièvre

Independent ( email )

No Address Available

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