Publication: Trade Flows and Trade Disputes
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Date
2014-11-09
ISSN
1559-744X
Published
2014-11-09
Author(s)
Reynolds, Kara M.
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Abstract
This paper introduces a new data set and establishes a set of basic facts and patterns regarding the ‘trade’ that countries fight about under WTO dispute settlement. It characterizes the scope of products, as well as the levels of and changes to the trade values, market shares, volumes, and prices for those goods that eventually become subject to WTO litigation. The first result is striking heterogeneity in the level of market access at stake across disputes: e.g., 14% of cases over disputed import products feature bilateral trade that is less than $1 million per year, and another 15% feature bilateral trade that is more than $1 billion per year. Nevertheless, some strong patterns emerge from a more detailed examination of the data. Both high- and low-income complainants tend to suffer important losses in foreign market access in the products that ultimately become subject to dispute. Furthermore, while the respondent’s imposition of an allegedly WTO-inconsistent policy is associated with reductions, on average, to trade values, volumes and exporter-received prices, there is some evidence of differences in the size of these changes across both the different types of policies under dispute and the potential exporter country litigants. Finally, these different types of policies under dispute can have dissimilar trade effects for the complainant relative to other (non-complainant) exporters of the disputed product, and this is likely to affect the litigation allegiance of third countries.
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Publication Trade Flows and Trade Disputes(World Bank Group, Washington, DC, 2014-07)This paper introduces a new data set and establishes a set of basic facts and patterns regarding the trade that countries fight about under World Trade Organization (WTO) dispute settlement. The paper characterizes the scope of products, as well as the levels of and changes to the trade values, market shares, volumes, and prices for those goods that eventually become subject to WTO litigation. The first result is striking heterogeneity in the level of market access at stake across disputes: for example, 14 percent of cases over disputed import products feature bilateral trade that is less than $1 million per year and another 15 percent feature bilateral trade that is more than $1 billion per year. Nevertheless, some strong patterns emerge from a more detailed examination of the data. Both high- and low-income complainants tend to suffer important losses in foreign market access in the products that ultimately become subject to dispute. Furthermore, although the respondent's imposition of an allegedly WTO-inconsistent policy is associated with reductions, on average, in trade values, volumes, and exporter-received prices, there is some evidence of differences in the size of these changes across the different types of policies under dispute and the potential exporter country litigants. Finally, these different types of policies under dispute can have dissimilar trade effects for the complainant relative to other (non-complainant) exporters of the disputed product and this is likely to affect the litigation allegiance of third countries.Publication Trade Agreements and Enforcement(World Bank, Washington, DC, 2015-04)This paper examines the 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, the paper models 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 policys costs to trading partners. The approach is to extend earlier theoretical models of trade agreement accession negotiations to the setting of enforcement negotiations in order to guide the empirical assessment. The paper uses instrumental variables to estimate the model on trade volume outcomes from World Trade Organization (WTO) disputes over 1995–2009. The evidence is consistent with theoretical predictions that larger import volume outcomes are associated with products that have smaller increases in foreign exporter-received prices (terms-of-trade losses for the importer) as a result of the dispute, larger pre-dispute import volumes, larger import demand elasticities, and smaller foreign export supply elasticities. 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This paper provides a rich, empirically-based assessment of ways that Turkey exercised trade policy flexibilities during the global economic crisis of 2008-11. First, and despite multilateral and customs union commitments that might limit changes to applied tariffs, Turkey made changes to both its applied Most Favored Nation and preferential tariffs that cumulatively affect nearly 9 percent of manufacturing imports and 10 percent of import product lines. Second, Turkey's cumulative application of temporary trade barrier (TTB) policies -- antidumping, safeguards and countervailing duties -- are estimated to impact by 2011 an additional 4 percent of imports and 6 percent of product lines. 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While such trade remedies are also frequent targets of dispute settlement activity under the WTO, given that Panel and Appellate Body rulings have almost invariably found that some aspect of each reviewed remedy was inconsistent with WTO obligations, an open research question is why aren't more remedies targeted by dispute settlement? The author provides a first empirical investigation of the trade remedy and WTO dispute settlement interaction by focusing on determinants of WTO members' decisions of whether to formally challenge U.S. trade remedies imposed between 1992 and 2003. He provides evidence that it is not only the size of the economic market at stake and the capacity to retaliate under potential DSU (dispute settlement understanding)-authorized sanctions that influence the litigation decision of whether to formally challenge a measure at the WTO. The author also finds that if the negatively affected foreign industry has the capacity to directly retaliate through a reciprocal antidumping investigation and measure of its own, its government is less likely to pursue the case on its behalf at the WTO. This is consistent with the theory that potential complainants may be avoiding WTO litigation in favor of pursuing reciprocal antidumping and hence "vigilante justice."
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