Dispute-Escalation in the WTO: Are Conflicts Over Environment, Health and Safety Regulation Riskier?

Abstract

The quantitative literature on WTO dispute settlement explains dispute outcomes primarily through country characteristics and neglects policy-variables. The environmental policy literature tends to assume that disputes over inter-jurisdictional differences in environment, health and safety (EHS) regulation are particularly prone to escalation - without testing this assumption for the population of WTO disputes. We focus on these gaps by testing the claim that disputes over EHS regulation are more likely to escalate than disputes over other issues. The theoretical underpinning of this hypothesis is that, relative to non-EHS disputes, gradual concessions by the defendant to the plaintiff and compensation to domestic interest groups in the defendant country in exchange for international trade concessions are harder to achieve in EHS cases. We develop and test this hypothesis with data on 506 dyadic WTO trade disputes in 1995-2003, using selection models. The results show that, ceteris paribus, EHS disputes are less prone to escalation from the consultation to the Panel/Appellate Body level, but more prone to escalation into compliance disputes once they have reached the Panel/Appellate Body level. This finding suggests that escalation dynamics at different stages of the WTO dispute-settlement process differ across EHS- and non-EHS disputes and should be studied in greater detail in further research.