Making trade agreements relevant for poor countries: why dispute settlement is not enough
Making trade agreements relevant for poor countries: why dispute settlement is not enough
This paper examines the political-economic causes of the failure to challenge poor countries in formal WTO trade disputes and discusses the static and dynamic costs and externality implications of this failure. The authors argue that this failure is partly due to the fact that developing countries have made fewer commitments than developed ones. The failure may also indicate that these countries do not realise the positive externality benefits associated with full participation in the institution:
- involvement as a respondent in WTO dispute settlement may induce learning and lead the country to more active engagement in other disputes as a complainant or interested third party in defending export market access interests
- a successful challenge of a developing country may result in the government undertaking a public effort to comply with WTO commitments, which may positively affect the probability that other countries also conform to WTO rulings, thus benefiting the developing country’s own export market access interests
- managing a balanced portfolio of WTO litigation can help governments to maintain public support for WTO engagement
The authors argue that in order to make the WTO dispute settlement understanding (DSU) mechanism work for developing countries foreign governments must pursue enforcement actions even when there is no market access incentive to do so. Realising that the likelihood that countries can pursue such "tough love" in a credible manner is low, credibility must be sought in other instruments, such as greater and more effective transparency mechanisms. Constituencies in these countries need to see implementation of commitments as being in their interest. The paper concludes that rather than rely on binding commitments and the threat of the DSU, a focus on transparency and analysis of the effects of policies in such regulatory areas may do more to bolster ownership and identify where multilateral commitments can be beneficial.