Hostname: page-component-7d684dbfc8-7nm9g Total loading time: 0 Render date: 2023-09-23T23:43:22.326Z Has data issue: false Feature Flags: { "corePageComponentGetUserInfoFromSharedSession": true, "coreDisableEcommerce": false, "coreDisableSocialShare": false, "coreDisableEcommerceForArticlePurchase": false, "coreDisableEcommerceForBookPurchase": false, "coreDisableEcommerceForElementPurchase": false, "coreUseNewShare": true, "useRatesEcommerce": true } hasContentIssue false

What Is Litigation in the World Trade Organization Worth?

Published online by Cambridge University Press:  02 February 2015

Get access


Conventional wisdom holds that the creation of international, court-like institutions helps countries to peacefully settle trade conflicts, thereby enhancing overall welfare. Many have argued, however, that these institutions remain ultimately ineffective because they merely reflect the distribution of power in the anarchic international system. We argue that international litigation provides economic spillovers that create opportunities for judicial free-riding and explore empirically how litigation in the World Trade Organization affects bilateral trade between countries involved in a trade dispute. We use a matching approach to compare the dynamics of trade flows between countries that experienced a panel ruling with trade relations of observably similar country pairs that did not experience a ruling. Based on this comparison we find that sectoral exports from complainant countries to the defendant increase by about $7.7 billion in the three years after a panel ruling. However, countries that have proactively filed a complaint and carried the main costs of litigation do not systematically gain more than less-active third parties that merely joined an existing trade dispute. This suggests that international judicial institutions can provide positive economic externalities and may thereby lead to a less power-based distribution of the gains from trade.

Research Article
Copyright © The IO Foundation 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Abadie, Alberto, and Gardeazabal, Javier. 2003. The Economic Costs of Conflict: A Case Study of the Basque Country. American Economic Review 93 (1):113–32.CrossRefGoogle Scholar
Abbott, Kenneth W., and Snidal, Duncan. 1998. Why States Act Through Formal International Organizations. Journal of Conflict Resolution 42 (1):332.CrossRefGoogle Scholar
Abbott, Kenneth W., and Snidal, Duncan. 2000. Hard and Soft Law in International Governance. International Organization 54 (3):421–56.CrossRefGoogle Scholar
Abbott, Kenneth W., Keohane, Robert O., Moravcsik, Andrew, Slaughter, Anne-Marie, and Snidal, Duncan. 2000. The Concept of Legalization. International Organization 54 (3):401–19.CrossRefGoogle Scholar
Allee, Todd. 2005. The Distinctiveness of Developing Country Trade Dispute Initiation. Unpublished manuscript, University of Maryland, College Park.Google Scholar
Allee, Todd. 2010a. The Geneva Effect: Trade Protection, Litigation, and Dispute Resolution in the World Trade Organization. Unpublished manuscript, University of Maryland, College Park.Google Scholar
Allee, Todd. 2010b. Legal Incentives and Domestic Rewards: A Litigation Model of GATT/WTO Dispute Resolution. Unpublished manuscript, University of Maryland, College Park.Google Scholar
Allee, Todd, and Peinhardt, Clint. 2011. Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment. International Organization 65 (3):401–32.CrossRefGoogle Scholar
Baccini, Leonardo. 2010. Explaining Formation and Design of EU Trade Agreements: The Role of Transparency and Flexibility. European Union Politics 11 (2):195217.CrossRefGoogle Scholar
Baccini, Leonardo, and Kim, Soo Yeon. 2012. Preventing Protectionism: International Institutions and Trade Policy. Review of International Organizations 7 (4):369–98.CrossRefGoogle Scholar
Bechtel, Michael, and Schneider, Gerald. 2010. Eliciting Substance from “Hot Air”: Financial Market Responses to EU Summit Decisions on European Defense. International Organization 64 (2):199223.CrossRefGoogle Scholar
Bown, Chad P. 2004a. Developing Countries as Plaintiffs and Defendants in GATT/WTO Trade Disputes. World Economy 27 (1):5980.CrossRefGoogle Scholar
Bown, Chad P. 2004b. On the Economic Success of GATT/WTO Dispute Settlement. Review of Economics and Statistics 86 (3):811–23.CrossRefGoogle Scholar
Bown, Chad P. 2005a. Participation in WTO Dispute Settlement: Complainants, Interested Parties, and Free Riders. World Bank Economic Review 19 (2):287310.CrossRefGoogle Scholar
Bown, Chad P. 2005b. Trade Remedies and World Trade Organization Dispute Settlement: Why Are So Few Challenged? Journal of Legal Studies 34 (2):515–55.CrossRefGoogle Scholar
Busch, Marc L. 2000. Democracy, Consultation, and the Paneling of Disputes Under GATT. Journal of Conflict Resolution 44 (4):425–46.CrossRefGoogle Scholar
Busch, Marc L., and Pelc, Krzysztof J.. 2010. The Politics of Judicial Economy at the World Trade Organization. International Organization 64 (2):257–79.CrossRefGoogle Scholar
Busch, Marc L., and Reinhardt, Eric. 2000. Bargaining in the Shadow of the Law: Early Settlement in GATT/WTO Disputes. Fordham International Law Journal 24 (1–2):158–72.Google Scholar
Busch, Marc L., and Reinhardt, Eric. 2006. Three's a Crowd: Third Parties and WTO Dispute Settlement. World Politics 58 (3):446–77.CrossRefGoogle Scholar
Busch, Marc L., Reinhardt, Eric, and Shaffer, Gregory. 2009. Does Legal Capacity Matter? A Survey of WTO Members. World Trade Review 8 (4):559–77.CrossRefGoogle Scholar
Busch, Marc L., Raciborski, Rafal, and Reinhardt, Eric. 2008. Does the Rule of Law Matter? The WTO and US Antidumping Investigations. Unpublished manuscript, Emory University, Atlanta, GA.Google Scholar
Carrubba, Clifford J., Gabel, Matthew, and Hankla, Charles. 2008. Judicial Behavior Under Political Constraints: Evidence from the European Court of Justice. American Political Science Review 102 (4):435–52.CrossRefGoogle Scholar
Chaudoin, Stephen, Kucik, Jeffrey, and Pelc, Krzysztof. 2013. Do WTO Disputes Actually Increase Trade? Paper presented at the 109th Annual Meeting of the American Political Science Association, August, Chicago.Google Scholar
Copelovitch, Mark S., and Pevehouse, Jon C.. 2013. The Trilemma and Trade Policy: The Monetary and Financial Roots of WTO Disputes. Unpublished manuscript, University of Wisconsin-Madison.Google Scholar
Davis, Christina. 2008. The Effectiveness of WTO Dispute Settlement: An Evaluation of Negotiation Versus Adjudication Strategies. Paper presented at the 104th Annual Meeting of the American Political Science Association, August, Boston.Google Scholar
Davis, Christina. 2012. Why Adjudicate? Enforcing Trade Rules in the WTO. Princeton, NJ: Princeton University Press.Google Scholar
Davis, Christina L., and Bermeo, Sarah Blodgett. 2009. Who Files? Developing Country Participation in GATT/WTO Adjudication. Journal of Politics 71 (3):1033–49.CrossRefGoogle Scholar
Fang, Songying. 2008. The Informational Role of International Institutions and Domestic Politics. American Journal of Political Science 52 (2):304–21.CrossRefGoogle Scholar
Francois, Joseph, Horn, Henrik, and Kaunitz, Niklas. 2008. Trading Profiles and Developing Country Participation in the WTO Dispute Settlement System. IFN Working Paper 730. Stockholm, Sweden: Research Institute of Industrial Economics.Google Scholar
Gartzke, Erik. 1998. Kant We All Just Get Along? Opportunity, Willingness, and the Origins of the Democratic Peace. American Journal of Political Science 42 (1):127.CrossRefGoogle Scholar
Gilligan, Michael J., and Sergenti, Ernest J.. 2008. Do UN Interventions Cause Peace? Using Matching to Improve Causal Inference. Quarterly Journal of Political Science 3 (2):89122.CrossRefGoogle Scholar
Goldstein, Judith, Kahler, Miles, Keohane, Robert O., and Slaughter, Anne-Marie. 2000. Introduction: Legalization and World Politics. International Organization 54 (3):385–99.CrossRefGoogle Scholar
Goldstein, Judith, Rivers, Douglas, and Tomz, Michael. 2007. Institutions in International Relations: Understanding the Effects of the GATT and the WTO on World Trade. International Organization 61 (1):3767.CrossRefGoogle Scholar
Gowa, Joanne, and Kim, Soo Yeon. 2005. An Exclusive Country Club: The Effects of the GATT on Trade, 1950–1994. World Politics 57 (4):453–78.CrossRefGoogle Scholar
Guzman, Andrew, and Simmons, Beth A.. 2002. To Settle or Empanel? An Empirical Analysis of Litigation and Settlement at the World Trade Organization. Journal of Legal Studies 31 (1):205–35.CrossRefGoogle Scholar
Hafner-Burton, Emilie M., Steinert-Threlkeld, Zachary C., and Victor, David G.. 2013. Leveling the Playing Field. Laboratory on International Law and Regulation Working Paper 18. School of International Relations and Pacific Studies, University of California, San Diego.Google Scholar
Hafner-Burton, Emilie M., Victor, David G., and Lupu, Yonatan. 2012. Political Science Research on International Law: The State of the Field. American Journal of International Law 106 (1):4797.CrossRefGoogle Scholar
Helfer, Laurence R., and Voeten, Erik. 2013. International Courts as Agents of Legal Change: Evidence from LGBT Rights in Europe. International Organization 68 (1):77110.CrossRefGoogle Scholar
Heston, Alan, Summers, Robert, and Aten, Bettina. 2009. Penn World Table Version 6.3. Philadelphia: Center for International Comparisons of Production, Income and Prices, University of Pennsylvania. Available at <>. Accessed 30 June 2010..+Accessed+30+June+2010.>Google Scholar
Ho, Daniel E., Imai, Kosuke, King, Gary, and Stuart, Elizabeth A.. 2007. Matching as Nonparametric Preprocessing for Reducing Model Dependence in Parametric Causal Inference. Political Analysis 15 (3):199236.CrossRefGoogle Scholar
Hofmann, Tobias, and Kim, Soo Yeon. 2013. Does Trade Comply? The Economic Effect(ivenes)s of WTO Dispute Settlement. Unpublished manuscript, National University of Singapore.Google Scholar
Horn, Henrik, and Mavroidis, Petros C.. 2008. The WTO Dispute Settlement System 1995–2006: Some Descriptive Statistics. Washington, DC: World Bank. Available at <>. Accessed 16 December 2010..+Accessed+16+December+2010.>Google Scholar
Huth, Paul K., Croco, Sarah E., and Appel, Benjamin J.. 2011. Does International Law Promote the Peaceful Settlement of International Disputes? Evidence from the Study of Territorial Conflicts Since 1945. American Political Science Review 105 (2):415–36.CrossRefGoogle Scholar
Huth, Paul K., Croco, Sarah E., and Appel, Benjamin J.. 2013. Bringing Law to the Table: Legal Claims, Focal Points, and the Settlement of Territorial Disputes Since 1945. American Journal of Political Science 57 (1):90103.CrossRefGoogle Scholar
Imbens, Guide W., and Wooldridge, Jeffrey M.. 2009. Recent Developments in the Econometrics of Program Evaluation. Journal of Economic Literature 47 (1):586.CrossRefGoogle Scholar
Jensen, J. Bradford, Quinn, Dennis P., and Weymouth, Stephen. 2013. Global Supply Chains, Currency Undervaluation, and Firm Protectionist Demands. NBER Working Paper 19239. Cambridge, MA: National Bureau of Economic Research.Google Scholar
Johns, Leslie, and Pelc, Krzysztof. 2014. Who Gets to Be in the Room? Manipulating Participation in WTO Disputes. International Organization 68 (3):663699.CrossRefGoogle Scholar
Kim, Moonhawk. 2008. Costly Procedures: Divergent Effects of Legalization in the GATT/WTO Dispute Settlement Procedures. International Studies Quarterly 52 (3):657–86.CrossRefGoogle Scholar
Kindleberger, Charles P. 1973. The World in Depression: 1929–1939. Berkeley: University of California Press.Google Scholar
Koremenos, Barbara. 2011. Institutionalism and International Law. Unpublished manuscript, University of Michigan, Ann Arbor.Google Scholar
Koremenos, Barbara, Lipson, Charles, and Snidal, Duncan. 2001. The Rational Design of International Institutions. International Organization 55 (4):761–99.CrossRefGoogle Scholar
Kucik, Jeffrey, and Pelc, Krzysztof. 2013. Measuring the Cost of Privacy: A Look at the Distributional Effects of Private Bargaining. Unpublished manuscript, University College London.Google Scholar
Lake, David A. 1993. Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential? International Studies Quarterly 37 (4):459–89.CrossRefGoogle Scholar
Lake, David A. 2010. Rightful Rules: Authority, Order, and the Foundation of Global Governance. International Studies Quarterly 54 (3):587613.CrossRefGoogle Scholar
Maggi, Giovanni, and Staiger, Robert W.. 2011. The Role of Dispute Settlement Procedures in International Trade Agreements. Quarterly Journal of Economics 126 (1):475515.CrossRefGoogle Scholar
Mansfield, Edward D., Milner, Helen V., and Rosendorff, B. Peter. 2002. Why Democracies Cooperate More: Electoral Control and International Trade Agreements. International Organization 56 (3):477513.CrossRefGoogle Scholar
Martin, Lisa L. 2013. Against Compliance. In International Law and International Relations: Synthesizing Insights from Interdisciplinary Scholarship, edited by Dunoff, Jeffrey L., and Pollack, Mark, 591610. New York: Cambridge University Press.Google Scholar
Morrow, James D., Siverson, Randolph M., and Tabares, Tressa E.. 1998. The Political Determinants of International Trade: The Major Powers, 1907–90. American Political Science Review 92 (3):649–61.CrossRefGoogle Scholar
Morrow, James D., Siverson, Randolph M., and Tabares, Tressa E.. 1999. Correction to “The Political Determinants of International Trade.” American Political Science Review 93 (4):931–33.CrossRefGoogle Scholar
Muthoo, Abhinay. 2000. A Non-Technical Introduction to Bargaining Theory. World Economics 1 (2):145–66.Google Scholar
Neumayer, Eric. 2013. Strategic Delaying and Concessions Extraction in Accession Negotiations to the World Trade Organization: An Analysis of Working Party Membership. World Trade Review 12 (4):669–92.CrossRefGoogle Scholar
Olson, Mancur. 1965. The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge, MA: Harvard University Press.Google Scholar
Park, Jee-Hyeong. 2011. Enforcing International Trade Agreements with Imperfect Private Monitoring. Review of Economic Studies 78 (3):1102–34.CrossRefGoogle Scholar
Pelc, Krysztof. 2014. The Politics of Precedent in International Law: A Social Network Application. American Political Science Review 108 (3):547–64.Google Scholar
Quinn, Dennis P., and Woolley, John T.. 2001. Democracy and National Economic Performance: The Preference for Stability. American Journal of Political Science 45 (3):634–57.CrossRefGoogle Scholar
Reinhardt, Eric. 2001. Adjudication Without Enforcement in GATT Disputes. Journal of Conflict Resolution 45 (2):174–95.CrossRefGoogle Scholar
Rosendorff, B. Peter. 2005. Stability and Rigidity: Politics and Design of the WTO's Dispute Settlement Procedure. American Political Science Review 99 (3):389400.CrossRefGoogle Scholar
Rubin, Donald B. 1979. Using Multivariate Matched Sampling and Regression Adjustment to Control Bias in Observational Studies. Journal of the American Statistical Association 74 (366a):318–28.Google Scholar
Russett, Bruce. 1994. Grasping the Democratic Peace: Principles for a Post-Cold War World. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Sattler, Thomas, and Bernauer, Thomas. 2011. Gravitation or Discrimination? Determinants of Litigation in the World Trade Organization. European Journal of Political Research 50 (2):143–67.CrossRefGoogle Scholar
Sattler, Thomas, Spilker, Gabriele, and Bernauer, Thomas. 2014. Does WTO Dispute Settlement Enforce or Inform? British Journal of Political Science 44 (4):877902.CrossRefGoogle Scholar
Schrodt, Philip A. 1994. Event Data in Foreign Policy Analysis. In Foreign Policy Analysis: Continuity and Change, edited by Neack, Laura, Hey, Jeanne A.K., and Haney, Patrick J., 145–66. Englewood Cliffs, NJ: Prentice Hall.Google Scholar
Schultz, Kenneth A. 1998. Domestic Opposition and Signaling in International Crises. American Political Science Review 92 (4):829–44.CrossRefGoogle Scholar
Simmons, Beth A. 2000. International Law and State Behavior: Commitment and Compliance in International Monetary Affairs. American Political Science Review 94 (4):819–35.CrossRefGoogle Scholar
Simmons, Beth A. 2005. Rules Over Real Estate: Trade, Territorial Conflict, and International Borders as Institution. Journal of Conflict Resolution 49 (6):823–48.CrossRefGoogle Scholar
Simmons, Beth A. 2010. Treaty Compliance and Violation. Annual Review of Political Science 13:273–96.CrossRefGoogle Scholar
Smith, James McCall. 2000. The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts. International Organization 54 (1):137–80.CrossRefGoogle Scholar
Stone Sweet, Alec, and Brunell, Thomas. 1998. Constructing a Supranational Constitution: Dispute Resolution and Governance in the European Community. American Political Science Review 92 (1):6381.CrossRefGoogle Scholar
Tomz, Michael. 2007. Domestic Audience Costs in International Relations: An Experimental Approach. International Organization 61 (4):821–40.CrossRefGoogle Scholar
Voeten, Erik. 2008. The Impartiality of International Judges: Evidence from the European Court of Human Rights. American Political Science Review 102 (4):417–33.CrossRefGoogle Scholar
Supplementary material: PDF

Bechtel and Sattler supplementary material


Download Bechtel and Sattler supplementary material(PDF)
PDF 336 KB