In this paper we seek to advance the debate on the conditions under which the WTO Dispute Settlement Body can bring about trade-liberalizing policy change in WTO members. Under what conditions do WTO members change domestic policies or measures that are challenged in WTO litigation? Starting from the assumption that policymakers are political-support maximizers who seek to avoid the mobilization of political enemies, we argue that the degree of integration in Global Value Chains (GVCs) of the economic sectors affected by a WTO dispute influences members’ propensity to change domestic policies when targeted in WTO litigation. The initiation of a WTO dispute against sectors highly integrated in GVCs engenders the emergence of a domestic coalition of pro-trade liberalization groups composed of exporters seeking to avoid the imposition of retaliatory measures and import-dependent firms wishing to exploit the opportunity to access cheaper imports. Under these circumstances, trade-liberalizing responses to WTO legal challenges are therefore more likely. We test this hypothesis by estimating a Cox proportional hazard model and find that GVCs positively impact states’ propensity to comply with the WTO dispute settlement panel rulings.
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For a more comprehensive review of these various literatures see Bernauer et al. (2014) and De Bièvre et al. (2017).
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We start the clock to calculate ‘time until compliance’ from the AB report because the extent of a violation, and therefore the extent of policy change required to bring about compliance, is only clarified for the defendants after a final ruling is delivered by the AB. As a robustness check, however, we run separate analyses in our supplementary appendix in which we calculate the ‘time until compliance’ from the original panels’ report. Our results are substantively similar.
Four additional details warrant attention. First, in cases where there were multiple complainants in a dispute, we distinguish each pair and count them as separate disputes. This decision is consistent with a number of works in the field (e.g., Horn et al. 1999; Bagwell et al. 2004) and was made so that we can observe the impact of additional WTO members in a dispute. Second, our sample does not include disputes that targeted horizontal measures, since these disputes did not target specific sectors. Although some horizontal measures may involve certain sectors more than others, we only examine responses to litigation if there is a sector whose import dependence can be measured. Third, a few disputes resulted in compliance around the same time there was a panel ruling. Even though the defendants in these disputes did not comply with a panel ruling per se, they demonstrated domestic policy change after a panel composition, in which the clarity of violations were most likely made before the circulation of panel reports. Finally, in certain disputes, defendants notified the WTO DSB of compliance, but we could not find the corresponding domestic legislation. These cases are coded “complied with” and we rely on WTO Members’ notification to the DSB and official WTO records to consider the extent of compliance.
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We are grateful to the attendees of the 9th Political Economy of International Organizations (PEIO) conference held in Salt Lake City, Utah. We extend our thanks to Leonardo Baccini, for his valuable comments. The authors gratefully acknowledge the support of the Research Fund of the University of Antwerp.
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Yildirim, A.B., Tyson Chatagnier, J., Poletti, A. et al. The internationalization of production and the politics of compliance in WTO disputes. Rev Int Organ 13, 49–75 (2018). https://doi.org/10.1007/s11558-017-9278-z
- International institutions
- World trade organization
- Global value chains