Trade Agreements and Enforcement: Evidence from WTO Dispute Settlement

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, formal trade dispute negotiations are modeled 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. The approach first extends the Staiger (1999, 2011) model from trade agreement accession negotiations to the setting of enforcement negotiations, and the resulting theory guides the empirical assessment. The model is estimated using instrumental variables on trade volume outcomes from 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 to foreign exporter-received prices (terms-of-trade losses) 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.

Sovereign Wealth Funds' Internationalization Strategies: The Use of Investment Vehicles

“…Second, according to the arguments of Bortolotti et al (2015) SWFs theoretically represent ideal investors due to their long investment horizons, and the ability to hold large stakes in the target company. Hence, SWFs may implement tailored monitoring incentives through an active involvement in the corporate governance of the target company (Brav et al, 2008;Chen et al, 2007). However, SWF activismpotentially pursued through majority acquisitionsmay attract more hostility and generate more severe political opposition by host-country governments.…”

Do trade flows respond to nudges? Evidence from the WTO’s Trade Policy Review Mechanism

“…Bown () finds that trade volumes are greater after WTO disputes when complainants have substantial retaliation power. Bown and Reynolds () further refine this result and provide evidence that import volume responses after trade disputes are in line with the terms‐of‐trade approach to WTO theory (Bagwell & Staiger, ). In related research, Bown and Reynolds () also show that complainants usually suffer a decrease in the bilateral exports of products that ultimately become subject to a dispute.…”

Dispute Settlement in the WTO (Mind Over Matter)

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