Pandering to the Audience: Understanding Third Party Influence on Compliance with World Trade Organization Dispute Settlement Decisions

Abstract

Do third parties have an impact on the compliance observed with rulings of the Dispute Settlement Body of the World Trade Organization? I demonstrate that third parties can impact the cost-benefit calculations of the respondent in its decision to comply with the rulings issued in a World Trade Organization dispute. I argue that different kinds of third parties impact compliance differently because of, first, the third party’s preferences to monitor a respondent and, secondly, the impact they have on a respondent’s considerations in its decision to comply. To test the impact of third parties on compliance with rulings of the Dispute Settlement Body, I examine data on compliance with rulings of the World Trade Organization’s Dispute Settlement Body from 1995 to 2006. Using a Heckman probit selection model that accounts for the fact that the disputes and third parties present during the compliance phase are not randomly selected, I find the third party’s relationship with the complainant and respondent results in varying effects on the likelihood of compliance.