Trading Profiles and Developing Country Participation in the WTO Dispute Settlement System

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractIt has been alleged since its inception that the WTO Dispute Settlement (DS) mechanism is biased against developing countries, as manifested in e.g. allegedly too low rates of dispute initiation. To shed light on this issue, this study analyses the determinants of developing country participation in the DS system, using bilateral industry-level trade data, and a data set on dispute initiation that is significantly richer than what has been employed in the literature. But the study also points to a number of fundamental conceptual and data problems that beset the whole empirical literature that seeks to draw policy conclusions based on country participation in the DS system. While perhaps appreciated by researchers working in this area, these problems appear to go unnoticed by practitioners drawing on this literature. LDCs into an "LDC Union" for the handling of complaints in the DS system. This Union is instructed to base its decisions concerning litigation on the combined exports of its members, and would draw on the combined resources of the countries in other respects.The model predicts that a country with the characteristics of this "LDC Union" would have 2 initiated roughly twice as many disputes as the model predicts that this group of countries would have launched if acting individually. One should be careful not to over-emphasize the validity of this magnitude. More interesting is that this experiment suggests that LDCs may have so few disputes not only because of small trade volumes, or because of small GDP levels, but also because of the interaction between such explanatory factors.The second question we examine is the common perception in the policy literature that the LDC trade composition explains their seemingly low participation rates. To this end we make the further thought experiment of letting the export structure of this "LDC Union" be the same as the average of the exports of G2, Earlier Industrialized and NewlyIndustrialized countries, while keeping the total volume of exports unchanged. This "LDC Union" is hence in terms of industry export structure a replica of the richer countries, but is in other respects an aggregation of LDCs. Using the estimated model, this change in export composition would have a fairly limited impact on dispute initiation by LDC, contrary to what is often suggested. In other words, the composition of trade does not appear to be a determining factor.We would fi...

Does legal capacity matter? A survey of WTO Members

“…Using these measures, Guzman and Simmons (2005) conclude that there is ' strong evidence that developing countries are constrained by their capacity to launch litigation ' (p. 559). Francois et al (2008) report results in line with those of Guzman and Simmons, but doubt that legal capacity, as opposed to levels of development, is really the key (p. 19). To advance this debate, a better measure of legal capacity is clearly needed.…”

“…Alternatively, other studies use the size of a Member's delegation in Geneva as a proxy for legal capacity (Francois et al, 2008 ;Sattler and Bernauer, 2008 ;Bown, 2005 ;Guzman and Simmons, 2005 ;Besson and Mehdi, 2004 ;Horn et al, 1999). The WTO publishes an annual phone directory for internal use which lists each Member's delegates in Geneva.…”

“…Francois et al (2008) use the World Bank Worldwide Governance Research Indicators Dataset for Government Efficiency, multiplied by the logarithm of GDP, to obtain a figure for a Member's aggregate legal capacity. Guzman and Simmons (2005), in contrast, use the International Country Risk Guide's (ICRG) subjectively coded variable, bureaucratic quality.…”

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“…The structure of cases also allows third parties to bandwagon against an the defendant and potentially benefitting them as well from the decision obtained, which alters the strategic calculations involved in whether to bring up a case or not (Bown and Hoekman 2005). Finally, given the nature of the rulings, which normally determine that compensation can only be obtained by restricting market access to the country at fault, it is difficult for most developing countries to obtain adequate and timely compensation for the trade damage suffered (Francois et al 2008).…”

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