Skip to main content

What Is Litigation in the World Trade Organization Worth?


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.

Hide All
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.
Abbott Kenneth W., and Snidal Duncan. 1998. Why States Act Through Formal International Organizations. Journal of Conflict Resolution 42 (1):332.
Abbott Kenneth W., and Snidal Duncan. 2000. Hard and Soft Law in International Governance. International Organization 54 (3):421–56.
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.
Allee Todd. 2005. The Distinctiveness of Developing Country Trade Dispute Initiation. Unpublished manuscript, University of Maryland, College Park.
Allee Todd. 2010a. The Geneva Effect: Trade Protection, Litigation, and Dispute Resolution in the World Trade Organization. Unpublished manuscript, University of Maryland, College Park.
Allee Todd. 2010b. Legal Incentives and Domestic Rewards: A Litigation Model of GATT/WTO Dispute Resolution. Unpublished manuscript, University of Maryland, College Park.
Allee Todd, and Peinhardt Clint. 2011. Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment. International Organization 65 (3):401–32.
Baccini Leonardo. 2010. Explaining Formation and Design of EU Trade Agreements: The Role of Transparency and Flexibility. European Union Politics 11 (2):195217.
Baccini Leonardo, and Kim Soo Yeon. 2012. Preventing Protectionism: International Institutions and Trade Policy. Review of International Organizations 7 (4):369–98.
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.
Bown Chad P. 2004a. Developing Countries as Plaintiffs and Defendants in GATT/WTO Trade Disputes. World Economy 27 (1):5980.
Bown Chad P. 2004b. On the Economic Success of GATT/WTO Dispute Settlement. Review of Economics and Statistics 86 (3):811–23.
Bown Chad P. 2005a. Participation in WTO Dispute Settlement: Complainants, Interested Parties, and Free Riders. World Bank Economic Review 19 (2):287310.
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.
Busch Marc L. 2000. Democracy, Consultation, and the Paneling of Disputes Under GATT. Journal of Conflict Resolution 44 (4):425–46.
Busch Marc L., and Pelc Krzysztof J.. 2010. The Politics of Judicial Economy at the World Trade Organization. International Organization 64 (2):257–79.
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.
Busch Marc L., and Reinhardt Eric. 2006. Three's a Crowd: Third Parties and WTO Dispute Settlement. World Politics 58 (3):446–77.
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.
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.
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.
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.
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.
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.
Davis Christina. 2012. Why Adjudicate? Enforcing Trade Rules in the WTO. Princeton, NJ: Princeton University Press.
Davis Christina L., and Bermeo Sarah Blodgett. 2009. Who Files? Developing Country Participation in GATT/WTO Adjudication. Journal of Politics 71 (3):1033–49.
Fang Songying. 2008. The Informational Role of International Institutions and Domestic Politics. American Journal of Political Science 52 (2):304–21.
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.
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.
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.
Goldstein Judith, Kahler Miles, Keohane Robert O., and Slaughter Anne-Marie. 2000. Introduction: Legalization and World Politics. International Organization 54 (3):385–99.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Imbens Guide W., and Wooldridge Jeffrey M.. 2009. Recent Developments in the Econometrics of Program Evaluation. Journal of Economic Literature 47 (1):586.
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.
Johns Leslie, and Pelc Krzysztof. 2014. Who Gets to Be in the Room? Manipulating Participation in WTO Disputes. International Organization 68 (3):663699.
Kim Moonhawk. 2008. Costly Procedures: Divergent Effects of Legalization in the GATT/WTO Dispute Settlement Procedures. International Studies Quarterly 52 (3):657–86.
Kindleberger Charles P. 1973. The World in Depression: 1929–1939. Berkeley: University of California Press.
Koremenos Barbara. 2011. Institutionalism and International Law. Unpublished manuscript, University of Michigan, Ann Arbor.
Koremenos Barbara, Lipson Charles, and Snidal Duncan. 2001. The Rational Design of International Institutions. International Organization 55 (4):761–99.
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.
Lake David A. 1993. Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential? International Studies Quarterly 37 (4):459–89.
Lake David A. 2010. Rightful Rules: Authority, Order, and the Foundation of Global Governance. International Studies Quarterly 54 (3):587613.
Maggi Giovanni, and Staiger Robert W.. 2011. The Role of Dispute Settlement Procedures in International Trade Agreements. Quarterly Journal of Economics 126 (1):475515.
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.
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.
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.
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.
Muthoo Abhinay. 2000. A Non-Technical Introduction to Bargaining Theory. World Economics 1 (2):145–66.
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.
Olson Mancur. 1965. The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge, MA: Harvard University Press.
Park Jee-Hyeong. 2011. Enforcing International Trade Agreements with Imperfect Private Monitoring. Review of Economic Studies 78 (3):1102–34.
Pelc Krysztof. 2014. The Politics of Precedent in International Law: A Social Network Application. American Political Science Review 108 (3):547–64.
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.
Reinhardt Eric. 2001. Adjudication Without Enforcement in GATT Disputes. Journal of Conflict Resolution 45 (2):174–95.
Rosendorff B. Peter. 2005. Stability and Rigidity: Politics and Design of the WTO's Dispute Settlement Procedure. American Political Science Review 99 (3):389400.
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.
Russett Bruce. 1994. Grasping the Democratic Peace: Principles for a Post-Cold War World. Princeton, NJ: Princeton University Press.
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.
Sattler Thomas, Spilker Gabriele, and Bernauer Thomas. 2014. Does WTO Dispute Settlement Enforce or Inform? British Journal of Political Science 44 (4):877902.
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.
Schultz Kenneth A. 1998. Domestic Opposition and Signaling in International Crises. American Political Science Review 92 (4):829–44.
Simmons Beth A. 2000. International Law and State Behavior: Commitment and Compliance in International Monetary Affairs. American Political Science Review 94 (4):819–35.
Simmons Beth A. 2005. Rules Over Real Estate: Trade, Territorial Conflict, and International Borders as Institution. Journal of Conflict Resolution 49 (6):823–48.
Simmons Beth A. 2010. Treaty Compliance and Violation. Annual Review of Political Science 13:273–96.
Smith James McCall. 2000. The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts. International Organization 54 (1):137–80.
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.
Tomz Michael. 2007. Domestic Audience Costs in International Relations: An Experimental Approach. International Organization 61 (4):821–40.
Voeten Erik. 2008. The Impartiality of International Judges: Evidence from the European Court of Human Rights. American Political Science Review 102 (4):417–33.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

International Organization
  • ISSN: 0020-8183
  • EISSN: 1531-5088
  • URL: /core/journals/international-organization
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
Type Description Title
Supplementary materials

Bechtel and Sattler supplementary material

 PDF (336 KB)
336 KB


Full text views

Total number of HTML views: 19
Total number of PDF views: 374 *
Loading metrics...

Abstract views

Total abstract views: 742 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 22nd January 2018. This data will be updated every 24 hours.