Deterring Disputes: WTO Adjudication as a Tool for Conflict Management

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An eective legal system not only solves specic disputes but also inhibits future violations. This paper examines how the WTO dispute settlment process resolves specic disputes and reduces their future occurrence. 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. Each dispute case claries interpretation of the law and enhances the credibility of enforcement.

This paper examines WTO dispute settlement to assess the role of courts to solve disputes and prevent future incidents. The eectiveness of WTO dispute settlement to resolve 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 the legal forum brings policy change in comparison with outcomes achieved in bilateral negotiations. In addition, past WTO disputes shape the subsequent pattern of trade barriers. Looking more broadly, the declining frequency of complaints led by all members from 1995 to 2015 is consistent with the deterrence argument. While some areas of law encounter repeat litigation, standards and new agreements have shown more resilient enforcement. Furthermore, analysis of the ling patterns from 1975 to 2012 suggests that the increase of legalization in the WTO has established deterrence eects that were absent in the GATT period. Looking more closely at individual cases, the paper evaluates how past complaints serve to clarify the law and increase the credibility of enforcement.