WTO Dispute Settlement as a Tool for Conflict Management

Abstract

The effect of courts arises through process and precedent. First, the process of selecting cases to escalate in the legal venue reveals information about the preferences of defendant and complainant. A third party arbitrator and multilateral membership adds international obligation and reputation as new leverage for compliance. Second, a formal dispute mechanism may have broader impact if the adjudication of one case leads to other countries reforming policies. This paper examines WTO dispute settlement to assess the role of courts to solve disputes and prevent future incidents. The effectiveness of WTO dispute settlement as a process for resolving specific disputes is tested with statistical analysis of an original dataset of potential trade disputes coded from U.S. government reports on foreign trade barriers. Evidence shows that taking a dispute to legal forum brings policy change and reduces dispute duration in comparison with outcomes achieved in bilateral negotiations. Whether these cases also prevent future disputes is more challenging to evaluate. The paper explores the possibility of precedent effects through analysis of the time trend in frequency of complaints filed by all members from 1995 to 2009.