The selection of foreign trade barriers for WTO litigation

The WTO agreements provide rules regarding the conduct of international trade. They regulate government interventions in trade policy that might impair the benefits accruing to their trade partners and the latter’s industries. In order to curb the incentive to install WTO-inconsistent trade measures, the WTO agreements provide member states with the possibility to challenge other members’ trade policies. Over the last two decades, WTO disputes have revolved around all kinds of trade barriers. However, a quick look at the list of WTO disputes indicates that certain Foreign Trade Barriers (FTBs) are more prone to litigation than others. This chapter studies why certain FTBs are often selected for WTO litigation whereas others are only seldom challenged. We present a game-theoretic approach and argue that the pre-litigation game that plays out in anticipation of a WTO dispute has a strong impact on the selection of FTBs for WTO litigation. The government-industry interaction that takes place before a WTO complaint is filed, determines the number of complaints, and which party provides the financial support for preparing a complaint. The veto power of governments in filing a WTO complaint explains why certain trade barriers, such as export barriers installed by the foreign country, are more prone to litigation than when the foreign government employs a trade policy that impacts the foreign imports in the domestic country.