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Trade Agreements and Enforcement: Evidence from WTO Dispute Settlement

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  • Bown, Chad
  • Reynolds, Kara
Abstract
This paper examines implications of the terms-of-trade theory for the determinants of outcomes arising under the enforcement provisions of international agreements. Like original trade agreement negotiations, we model formal trade dispute negotiations as potentially addressing the terms-of-trade externality problem that governments implement import protection above the globally efficient level so as to shift some of the policy's costs onto trading partners. We first extend earlier theoretical models from trade agreement accession negotiations to the setting of enforcement negotiations, and the resulting theory guides our empirical assessment. We use instrumental variables to estimate the model on trade volume outcomes from WTO disputes over 1995-2009. Our evidence is consistent with theoretical predictions that larger import volume outcomes are associated with products that have smaller increases to foreign exporter-received prices (terms-of-trade losses to the importer) as a result of the dispute, larger pre-dispute import volumes, larger import demand elasticities, and smaller foreign export supply elasticities. Dispute settlement outcome differences are also explained by variation in institutionally-motivated measures of retaliation capacity and the severity of the free rider problem associated with foreign exporter concentration.

Suggested Citation

  • Bown, Chad & Reynolds, Kara, 2015. "Trade Agreements and Enforcement: Evidence from WTO Dispute Settlement," CEPR Discussion Papers 10571, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10571
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    Citations

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    Cited by:

    1. Mostafa Beshkar & Jee-Hyeong Park, 2017. "Dispute Settlement with Second-Order Uncertainty: The Case of International Trade Disputes," CAEPR Working Papers 2017-010, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    2. Petros C. Mavroidis, 2016. "Dispute Settlement in the WTO. Mind over Matter," RSCAS Working Papers 2016/04, European University Institute.
    3. Caruso Raul, 2020. "What Post COVID-19? Avoiding a «Twenty-first Century General Crisis»," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 26(2), pages 1-09, May.
    4. Conconi, Paola & DeRemer, David R. & Kirchsteiger, Georg & Trimarchi, Lorenzo & Zanardi, Maurizio, 2017. "Suspiciously timed trade disputes," Journal of International Economics, Elsevier, vol. 105(C), pages 57-76.
    5. Antoine Bouet & Jeanne Métivier, 2017. "Is the WTO Dispute Settlement Procedure Fair for Developing Countries?," Working Papers hal-02149414, HAL.
    6. Murtinu, Samuele & Scalera, Vittoria G., 2016. "Sovereign Wealth Funds' Internationalization Strategies: The Use of Investment Vehicles," Journal of International Management, Elsevier, vol. 22(3), pages 249-264.
    7. Liebman, Benjamin H. & Reynolds, Kara M., 2022. "Casualties of trade wars," European Economic Review, Elsevier, vol. 148(C).
    8. Kazutaka Takechi, 2023. "How are the precedents of trade policy rules made under the World Trade Organization?," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 806-821, November.
    9. Jaime DE MELO & Marcelo OLARREAGA, 2017. "Trade Related Institutions and Development," Working Papers P199, FERDI.
    10. Kuenzel, David J., 2017. "WTO dispute determinants," European Economic Review, Elsevier, vol. 91(C), pages 157-179.
    11. Bown, Chad P. & Keynes, Soumaya, 2020. "Why Trump shot the Sheriffs: The end of WTO dispute settlement 1.0," Journal of Policy Modeling, Elsevier, vol. 42(4), pages 799-819.
    12. Antoine Bouët & Jeanne Métivier, 2020. "Is the dispute settlement system, “jewel in the WTO’s crown”, beyond reach of developing countries?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(1), pages 1-38, February.
    13. Conconi, Paola & DeRemer, David R. & Kirchsteiger, Georg & Trimarchi, Lorenzo & Zanardi, Maurizio, 2017. "Suspiciously timed trade disputes," Journal of International Economics, Elsevier, vol. 105(C), pages 57-76.

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    More about this item

    Keywords

    Dispute settlement; Terms of trade; Trade agreements; Wto;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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