Which countries are more likely to initiate a dispute in the WTO Dispute Settlement Mechanism?

Which countries are more likely to initiate a dispute in the  WTO Dispute Settlement Mechanism?

This Dissertation is focused on dispute initiation in the WTO Dispute Settlement system. The main question the author attempts to at least partially answer is: Why do countries initiate a dispute in the WTO Dispute Settlement Mechanism? The answer to this question is important for international trade and the enforcement of international trade laws. These laws are more often than not drafted in an extremely vague manner in order to be politically acceptable. The Dispute Settlement Mechanism judges cases that are intentional as well as unintentional violations of WTO law. When they are unintentional, the task of the WTO dispute settlement system is interpreting the rules. This means that countries who participate eagerly in initiating complaints are well-positioned to shape the law’s interpretation. We can therefore assume that whatever influences initiation, also influences who interprets and shapes international trade laws. This article is a brief summary of the dissertation: Which countries are more likely to initiate a dispute in the  WTO Dispute Settlement Mechanism?

Theories and variables

There are several variables and factors that can possibly influence initiation, and the author has done an extensive literature study about them. This in order to choose which variables would be analyzed. The choice of variables was influenced by existing literature as well as the variable’s measurability. Two variables were chosen for further analysis.

The first variable is economic development classification. Is a country developing or developed? There are many authors in recent literature that believe the WTO DSM is biased towards developed countries for several reasons. The most recurring reasons are their lack of economic development, and therefore, lack of funds or human capital.

“A bias in participation activity may stem from the current system of self-representation requiring that countries have sufficient resources to both monitor and recognize relevant WTO violations, and to fund legal proceedings in cases in which their rights have been violated.” (Bown, 2005)

These authors and their analyses make : H1: Developing countries initiate less WTO Disputes than developed countries because of their level of economic development. If this hypothesis is correct, they are given less chances to interpret WTO rules and shape international trade. This would mean the WTO falls short of its goals, and should look into possibly changing the dispute system.

There is, however, another explaining variable which could provide us with answers. This variable is Trade interdependence. It has been mentioned several times in recent literature that trade interdependence has its influence on peace and conflict. What if, however, the fact that you are more dependent on trade means that you are more likely to initiate a dispute in the WTO DSM? It is plausible to believe that when there is more at stake, one is more willing to defend their position on an international level. After looking into several theories regarding trade interdependence in a literature study, the second hypothesis of the thesis is: H2: Members who are highly dependent on trade are more likely to initiate a dispute in the WTO DS than members with less trade interdependence.

Data

In order to test these hypotheses, data was collected from various sources. The data contains the 504 initiated disputes in recent WTO DSM history, as well as a list of all WTO countries. The cases are classified per country that initiated them. The countries are categorized into 2 categories for the sake of the primary hypothesis. The UN categorization of level of economic development was used. Since linear regression was not possible due to the skewedness of the data and the dataset is also dealing with count data, the chosen analysis was a Poisson regression analysis.

Conclusions

After performing the Poisson regression analysis on the dataset, there are three pertinent developments that lead to the conclusion of this dissertation. First of all, if one looks at the type of country as a distinct variable, the analysis shows that this highly influences initiation. A developed country is more likely to initiate a dispute. This result by itself would be quite negative for the World Trade Organization. It would mean that developing countries are given less chances to interpret WTO rules and shape international trade. Secondly it seems that trade interdependence impacts a country’s decision to initiate in a negative way. This goes against hypothesis 2. Lastly, since most developed countries have a relatively high trade interdependency compared to others, some refinement of the conclusion of hypothesis one is needed. The analysis shows us that when both variables are in play, both of the variables’ effects are nuanced. If you therefore look at the interaction between both independent variables as well as the dependent variable, the considerations made above need to be toned down. The nuance that the interaction variable gives us is that even if a developed country should be initiating a lot more than developing countries, this effect is lessened due to trade interdependence. Even though developed countries are much more likely to initiate a dispute according to the first parameter, their trade interdependence negates this effect significantly and gives the developing countries some breathing room.

Last but not least, one implication of this research needs to be emphasized. Throughout many author’s work, as well as mine, it seems quite clear that the classification of the WTO regarding developing countries needs to be adjusted to reality. The system of countries choosing whether or not they are developing countries is extremely outdated. The WTO gets a lot of criticism for using this system, and after seeing the impact hypothesis one can have on initiation by itself, it can be possible that this influences developing countries. It should be looked at in more detail.

“In many poorer members the administrative problems they face rather than the WTO system will be the determinant factor. There are some signs that the system works to provide a ‘level playing field’ and that the opportunities are readily available to all members.” (Abbott, 2007)