World Trade Organization: Effectiveness and Enforcement Flashcards
Effectiveness of the Organization - Goldstein
- Argues against Rose because the paper didn’t consider de facto vs de jure members
- De facto members could be colonial territories, newly independent countries, and countries waiting to access the GATT
- GATT/WTO is not the only trade agreement
-There are also colonial preferences, PTAs, and asymmetric trade agreements
Goldstein does a statistical analysis with the gravity model using control variables such as:
- Adjacency
- Common language
- Colonial ties
- Common currency
- Island, or land locked
- Institutions, infrastructure, migration flows
- Other PTAs
Results:
- Found that PTAs increased trade by 35%, and there was evidence that international trade agreements complemented each other
Criticisms:
- There could be other intervening variables that cause membership in the GATT/WTO and increase in trade, so that it is not the WTO that is causing the increase in trade, but something else, eg. signalling
Dispute Settlement Mechanism - Busch and Reinhardt
Have developing countries secured more concessions?
- Developing countries are more active in disputes, but it does not mean that they secure more concessions
- Wealthier countries tend to resolve their disputes through negotiation, either in consultations or at the panel stage before a verdict
- Developing countries are far less likely than richer ones to induce a settlement before a ruling is issued, but concessions are more likely before a ruling
- This can be explained by the institutional capacity gap
Implications:
- Developing countries have a harder time getting concessions due to the lack of legal resources
Criticisms:
- Maybe the reason that these countries are not getting as many concessions is not necessarily because of the capacity gap, but rather because their trade markets are not as big so other countries do not care about pleasing them
- If you get into a dispute with the US you would want to make them happy to keep the door open for further trade deals, this would not be the same if the country was smaller so you would wait for a court to tell you to rectify the situation because you don’t care so much about making them happy
Gravity Model
- High explanatory power
- Easily available data
- Trade = (GDPi * GDPj) / (Distance)
- Bilateral trade is directly proportional to economic size of two countries and indirectly proportional to the distance between them
Does the GATT/WTO increase trade? - Rose
- Rose finds no empirical evidence the GATT/WTO increases trade flows among member countries
- Looks at at the effect of the GATT/WTO on de jure members
- But informal governance plays a role
- Many countries were not de jure members but they enjoyed MFN market access, ie. de facto members
- GATT/WTO is only one of many trade agreements
Learning by Doing - Davis and Bermeo
- Governments and industry must invest considerable resources in learning how to use the dispute process the first time
- Experience gathered in the first case can be applied to future cases
- Punch-line: fixed costs related to institutional capacity and knowledge result in economies of scale for dispute initiation
DV: count of the number of cases initiated by a country in a given year
Two main IVs capturing the level of experience of countries:
1. Count of initiations in the previous ten years
2. Count of cases in which a country was a defendant in the
previous ten years
Criticisms:
- Maybe its not necessarily a learning effect but rather a selection effect, maybe those countries that constantly get into disputes are somehow statistically significant from those that don’t
-So its not that countries who have used the DSM will continue to use it because its now easier for them, rather the reason for the initial use is causing further use
- Also it’s only economies of scale with other developing countries, just cause you win some disputes with another developing country doesn’t mean that you will be able to win a dispute with the US
