The Effectiveness of WTO Dispute Settlement: An Evaluation of Negotiation Versus Adjudication Strategies

Christina L. Davis

Princeton University∗

August 2008


In the context of overlapping bilateral, regional, and multilateral trade agreements, states face a wide array of options for market opening strategies. This paper examines why states choose to adjudicate some trade disputes in the WTO dispute settlement process while negotiating or ignoring others. It then compares outcomes given the choice among alternative strategies. I argue that governments use choice of negotiation forum to signal commitment to resolve a dispute. This choice provides information that contributes to settlement by reducing uncertainty about government resolve to defend or challenge a given trade barrier. The argument 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 U.S. selection of WTO disputes follows a political logic favoring industries that are highly mobilized in the United States and where there is strong support for protection by the foreign trade partner. Taking into account the factors that push politicized cases into WTO adjudication, the legal forum is shown to be effective to resolve trade conflict in terms of policy change and dispute duration.

The Effectiveness of WTO Dispute Settlement

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