The Role of Institutional-Legal Capacity and Power in Explaining the Performance of Developing Countries in WTO Disputes against the G2

Abstract

This article analyses the performance of developing countries in WTO disputes against the USA and EU (the G2) from 1995 to 2012. It investigates the influence of four factors – WTO rules and norms, institutional-legal capacity, market power, and trade dynamics – on two samples, namely disputes initiated and successfully concluded against the G2. Generalized Linear Models (GLMs) are used to analyse the data. They show that, while relative bilateral exports also play a role, the institutional-legal capacity and market power of developing countries (as represented by GDP) play the most important role in allowing developing countries to initiate disputes against the G2, and to complete them successully.

Development and the Dispute Settlement Body of the World Trade Organization: a survival analysis

“…The database of this research has the format described in Table 3. The selection of total GDP is in accordance with Francois, Horn and Kaunitz (2008), Reich (2017), and Carvalho and Canesin (2018), who did not find a strong correlation between GDP per capita or GNI and the initiation of disputes; however, GDP was significant. The choice of total exports of goods and services are also underpinned by the literature as in Horn, Mavroidis and Nordström (2005), Francois, Horn and Kaunitz (2018), Reich (2017), and Carvalho and Canesin (2018) (See Table 2).…”

“…Another important feature present in the literature is the nature of the products and the diversity of the trade product basket of a country. Some authors argue that there is a positive propensity between the number and diversity of trade flow and the initiation of a dispute, such as Francois, Horn and Kaunitz (2008), and Carvalho and Canesin (2018).…”

“…Guzman and Simmons (2005), for instance, inserted three other proxies in their analysis: number of embassies, government expenditures, and Bureaucratic Quality Index (BQI) provided by International Country Risk Guide (ICRG). Francois, Horn and Kaunitz (2008), and Carvalho and Canesin (2018) agree that LC cannot be measured only by the number of delegators, instead they argue that a country's income should also compose the proxy of LC.…”

“…Reich (2017), in turn, brings a quite updated study, but his method and variables are not robust, since the author does not include other variables besides GDP and GNI. Carvalho and Canesin (2018) present a significant data contribution; however, their study concerns only the disputes that involved the EU and the US. The third contribution consists in the observation of not only the initiation of a dispute, but also of the reasons why countries are challenged by others (responses).…”

“…Abbott argues that the low participation of developing nations is even more discrepant when it is observed that only 10% of the DCs and LDCs were responsible for initiating litigations and the other 90% have never even started a single dispute (Abbott 2007). Horn, Mavroidis and Nordström (2005), Guzman and Simmons (2005), Francois, Horn and Kaunitz (2008), Reich (2017), and Carvalho and Canesin (2018) propose quantitative analyses and quite good insights and reflections on the initiation of disputes in the WTO. Nonetheless, some of these studies lack a robust observation of the existing WTO disputes (Horn, Mavroidis and Nordström 2005;Francois, Horn and Kaunitz 2008); others do not offer proper numbers of independent variables related to the initiation of disputes (Reich 2017); others do not focus on all the disputes (Carvalho and Canesin 2018); and some also revealed methodological struggles (Francois, Horn and Kaunitz 2008).…”