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The WTO Dispute Settlement Mechanism: Battlefield or Cooperation? A Commentary on Fritz Breuss

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  • Wilhelm Kohler

Abstract

EU--US trade disputes have recently caught much attention, because they have involved lasting non-compliance coupled with WTO-authorized retaliation. A recent paper by Breuss (2004) shows that the outcome in most cases has probably involved economic damage on both sides. Does this testify to a general weakness, or even failure, of the WTO Dispute Settlement Mechanism? This paper develops a theoretical framework, based on the Bagwell and Staiger (2002) theory of the GATT/WTO, that helps us explain why the DSM might lead to mutually harmful non-compliance cum sanctions. If this happens, we should still not jump to concluding failure of the DSM. Interpreting the DSM as a political cooperation device, the framework allows us to identify conditions under which the outcome is efficient in political economy terms, even though it might involve economic harm on both sides. In addition to a better understanding of the empirical results reported by Breuss (2004), the framework also allows us to identify certain general weaknesses and flaws of the DSM that should be recognized when reviewing the Dispute Settlement Understanding in the Doha round negotiations.

Suggested Citation

  • Wilhelm Kohler, 2004. "The WTO Dispute Settlement Mechanism: Battlefield or Cooperation? A Commentary on Fritz Breuss," Journal of Industry, Competition and Trade, Springer, vol. 4(4), pages 317-336, December.
    • Handle: RePEc:kap:jincot:v:4:y:2004:i:4:p:317-336
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    References listed on IDEAS

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    1. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
    2. Anderson, Kym, 2002. "Peculiarities of retaliation in WTO dispute settlement," World Trade Review, Cambridge University Press, vol. 1(2), pages 123-134, July.
    3. Bagwell,K. & Mavroidis,P.C. & Staiger,R.W., 2003. "The case for auctioning countermeasures in the WTO," Working papers 14, Wisconsin Madison - Social Systems.
    4. Robert Z. Lawrence, 2003. "Crimes and Punishments?: Retaliation under the WTO," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 372, April.
    5. Fritz Breuss, 2004. "WTO Dispute Settlement: An Economic Analysis of four EU-US Mini Trade Wars," WIFO Working Papers 231, WIFO.
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    Cited by:

    1. Subhayu Bandyopadhyay & Arnab K. Basu & Nancy H. Chau & Devashish Mitra, 2022. "On Terms of Trade, Offshoring Ties, and the Enforcement of Trade Agreements," Working Papers 2022-039, Federal Reserve Bank of St. Louis, revised Apr 2023.
    2. Bandyopadhyay, Subhayu & Basu, Arnab K. & Chau, Nancy H. & Mitra, Devashish, 2022. "On Trade Policy Preference and Offshoring Ties," IZA Discussion Papers 15782, Institute of Labor Economics (IZA).

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