The Globalization of Production and the Politics of Dispute Initiation at the World Trade Organization

Abstract

The aim of this article is to show how the degree of integration into so‐called global value chains (GVCs) affects World Trade Organization (WTO) members’ decision to initiate a dispute at the WTO. Many potential violations of WTO law remain unchallenged, raising the question under which conditions WTO members complain about particular allegedly‐WTO‐incompatible policies. Controlling for alternative explanations, we demonstrate that decision‐makers are generally more likely to try and eliminate barriers to cross‐border trade by tabling a WTO complaint, when they are facing pressures to do so by firms and sectors highly integrated into such GVCs, especially when these are multinational corporations with sourcing interests in the defendant country. We test our hypothesis by comparing data from trade barrier reports with actual dispute initiation data from the US and find that, all else equal, trade barriers are more likely to be filed as disputes at the WTO in sectors with US MNCs highly integrated into GVCs. In light of the anti‐WTO rhetoric of the current US administration and its attempts to undermine its functioning and legitimacy, this analysis suggests that GVCs activate relevant societal actors that have an interest to uphold existing multilateral trade commitments, even in the efface of reluctance from their own political leaders.

Introduction: Bringing Institutions Back in the Study of Global Value Chains

“…The contribution by Yildirim et al. () helps filling this gap by showing that decision‐makers are more likely to try and eliminate barriers to cross‐border trade by tabling WTO complaints when facing pressures by firms and sectors highly integrated into GVCs. In particular, the contribution shows that whenever a potential WTO dispute touches upon the interests of Multinational Corporations, policymakers in complainant countries can expect these firms’ affiliates in defendant WTO members to contribute to a political climate that is more conducive to compliance.…”

The European Union and the political economy of enforcing international trade rules

“…The EU, in particular its Market Access Advisory Committee, basically has two options from which it can choose: negotiations or litigation. While the literature on the enforcement of international trade rules has so far focused on the drivers of WTO dispute onset (Kim and Spilker, 2019; Ryu and Stone, 2018; Yildirim et al., 2018), this exclusive focus on legal enforcement obscures that policymakers can also use other political tools, such as engaging in various kinds of formal and informal negotiations with its relevant trading partners. Policymakers do not solely rely on litigation as an enforcement strategy but often do opt for less formal political negotiations to convince trade partners to remove their trade barriers (Figure 2), begging the question as to why.…”

“…Existing research on the US has illuminated the role of domestic exporting constituencies demanding that policymakers act to remove foreign trade barriers (Brutger, 2017; Davis, 2012; Kim and Spilker, 2019; Ryu and Stone, 2018; Yildirim et al., 2018). These political-economy approaches of trade policy suggest that policymakers’ choice to act to remove foreign trade barriers can be viewed as a bottom-up process largely determined by the political influence of domestic exporting constituencies.…”

“…First, we contribute to filling an important gap in the EU trade policy literature as we offer the first attempt to explain whether and how the EU acts as an enforcer of international trade rules. We thus contribute to the literature on the politics underlying the enforcement of international trade rules within other political systems and from a cross-national perspective (Davis, 2012; Kim and Spilker, 2019; Sattler and Bernauer, 2011; Yildirim et al., 2018). Second, rather than focusing on peculiar or unique characteristics of the EU’s trade policymaking process, we embed the study of EU trade policy in the broader literature on the political economy of trade policy (Dür et al., 2020).…”

Reforming WTO Conflict Management: Why and How to Improve the Use of ‘Specific Trade Concerns’

“…American firms expend considerable resources ensuring that USTR is aware of their concerns (Ryu and Stone, 2018;Yildirim, et al, 2018), which is rational because their interests may be large enough that they need not worry about others free-riding on the results of an STC or dispute case. But the incentives may work against the developing country private sector and especially their law firms from investing such resources (Bown, 2011a).…”