Participation in WTO Dispute Settlement: Complainants, Interested Parties and Free Riders

Abstract

What affects a country's decision of whether to formally engage in a trade dispute directly related to its exporting interests? This paper empirically examines determinants of affected country participation decisions in formal trade litigation arising under the World Trade Organization (WTO) between 1995 and 2000. We investigate determinants of nonparticipation and examine whether the incentives generated by the system's rules and procedures discourage active engagement in dispute settlement by developing country members in particular. While we find the size of exports at stake to be an important economic determinant affecting the decision to participate in challenges to a WTO-inconsistent policy, we also provide evidence that measures of a country's retaliatory and legal capacity, as well as its international political-economic relationships matter. These results are consistent with the hypothesis of an implicit institutional bias generated by the system's rules and incentives that particularly affects developing country participation in dispute settlement.

Keywords: Developing Countries, Dispute Settlement, Trade Disputes, WTO, GATT

JEL Classification: F13, K33, K41