Suspiciously timed trade disputes

Abstract

This paper shows that electoral incentives affect the occurrence of trade disputes. Focusing on WTO disputes filed by the United States during the 1995-2012 period, we show that U.S.presidents are more likely to initiate a dispute in the year preceding their re-election date.Moreover, disputes filed by the U.S. tend to target industries that are important to swing states in the presidential election. To explain these regularities, we develop a theoretical model in which an incumbent can file a trade dispute to appeal to voters motivated by reciprocity. The incumbent's ability to initiate a dispute during the re-election campaign provides an advantage over the challenger, who cannot commit to file the dispute if elected. If voters' ideological preferences are not too strong in favor of either candidate, the incumbent will file a trade dispute to increase his re-election chances. To explain these regularities, we develop a theoretical model in which an incumbent can file a trade dispute to appeal to voters motivated by reciprocity. The incumbent's ability to initiate a dispute during the re-election campaign provides an advantage over the challenger, who cannot commit to file the dispute if elected. If voters' ideological preferences are not too strong in favor of either candidate, the incumbent will file a trade dispute to increase his re-election chances.JEL classifications: F13, D72, D78, D63.

Trade Gains from Legal Rulings in the WTO Dispute Settlement System

“…In fact, trade flows decreased for all legal participants as well as non-participants. This result seems to imply that mutually agreed cases involve more or less ‘desperate’ situations in which the disputing parties are forced to choose a restriction of imports instead of more general trade liberalization, possibly for political benefit (Conconi et al , 2017).…”

“…Lastly, this paper addresses concerns over the possible endogeneity bias facing estimation for the DSB effect, noting that WTO disputes and DSB outcomes are not random or strictly exogenous. Reverse causality aside, even differencein-difference estimation with country fixed effects is not a perfect solution for this endogeneity problem (Conconi et al, 2017). The omitted unobservable timevarying variables are arguably the most significant factors contributing to a potential endogeneity bias (Baier and Bergstrand, 2007).…”

“…As Table A3 shows, the effects of the WTO DSB possibly depend on the behavior of exporters that may vary by sector and agreement. This study, however, has not allowed for such heterogeneity in sector and agreement as it would require precise and sufficient data to do so (Conconi et al ., 2017).…”

Choosing awareness over fear: Risk analysis and free trade support global food security

“…WTO members differ in interpretation and implementation of the rules. Countries and individuals at times attempt to navigate the system to advance their own political and economic advantage ( Conconi et al, 2017 ; Worsnop, 2017 ). The SPS Agreement was established in part because of widespread barriers maintained in the name of risk protection with no effective mechanism for challenging the basis of such measures.…”

Learning by ruling and trade disputes

“…On the empirical side, there are papers that examine various determinants of the initiation and outcome of trade disputes, including Busch (2000), Busch andReinhardt (2000, 2006), Simmons (2002, 2005), Bown (2005), Davis and Bermeo (2009), Bown and Reynolds (2014), Conconi et al (2017), Kuenzel (2017) and Maggi and Staiger (forthcoming). But none of these papers are concerned with the dynamics of court learning.…”