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Trade Gains from Legal Rulings in the WTO Dispute Settlement System

  • WONKYU SHIN (a1) and DUKGEUN AHN (a2)

Using bilateral trade data on WTO disputes from 1995 to 2010 within the framework of multilateral trade, this paper empirically investigates whether legally winning a WTO dispute leads to actual trade gains. This study helps to illuminate the efficacy of the WTO dispute settlement system and to understand the role of the system as an institutional device for promoting multilateral trade liberalization. Assessing differential effects of the WTO dispute settlement rulings and the legal status of participants, this paper examines how trade gains are created and distributed among WTO members. Our empirical findings suggest that winning a legal dispute contributes to multilateral trade liberalization, not merely by rectifying trade problems for prevailing complainants but more so by providing better market access for all WTO members. This result reaffirms that the WTO dispute settlement system fulfills its purpose as a regulatory instrument for promoting multilateralism and market competition.

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We are very grateful to Jeffrey Bergstrand, Mario Crucini, Sungjoon Cho, Jee-Hyeong Park, Patrick Messerlin, Taeho Bark, Jung Hur, Joo Yeon Sun, Walter G. Park, Krzysztof J. Pelc, Aaditya Matto, Ana M. Fernandes, Wonhee Lee, and Tom Norris for helpful discussions and comments on earlier drafts. We also deeply appreciate Alan Winters and anonymous reviewers for their insightful suggestions. We recognize the research support by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2015S1A3A2046224) and Seoul National University Asia Center (SNUAC-2015-008).

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World Trade Review
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