A Protective Shield for Firms? The Case of WTO Litigation and Sectoral Trade

• In Event: Poster Session: Aid and International Organizations in IPE & Contemporary Issues in Political Science Education
  In Poster Session: Poster Session: Aid and International Organizations in IPE

Abstract

The number of trade policy measures that violate international trade agreements exceeds by far the number of WTO disputes. Scholars have been widely studying political and economic determinants of WTO dispute settlement participation since its initiation in 1995. Yet, only a few studies focused on explanations that go beyond country-level factors. In this study, I contribute to our understanding of governmental decision making on on the selection of WTO dispute cases. I argue that the role of sectoral trade impacts the initiation and escalation of WTO litigation through two mechanisms. First, I claim that trade disputes aim to protect domestic sectors against breaches of international trade agreements, and thus, I expect larger trade sectors to increase the likelihood of dispute onset. Second, I focus on the role of bilateral trade and argue that the existence of higher sectoral trade dependency increases governments’ involvement in WTO litigation. Assuming that countries are more willing to bear the costs when the stake is high, I study whether these effects become stronger throughout the WTO dispute stages. I test my hypotheses using sectoral trade data from CEPII for 97 sectors, 193 countries and 92 country-dyads between 1996 and 2019. I employ bias-reduction binomial-response models and ordinal logistic regression. My findings support the hypothesized positive effect of larger sectoral trade as well as bilateral sectoral trade dependencies on the likelihood of dispute onset and partly on dispute escalation. When sectors with larger trade and greater bilateral trade dependencies are affected by foreign breaches of international trade agreements, governments are more likely to file a WTO dispute case.

Author

• Alessia Invernizzi, University Konstanz