Developing Countries as Plaintiffs and Defendants in GATT/WTO Trade Disputes

Developing countries have been increasing their participation in the formal institutions and proceedings of the multilateral trading system. A prominent example is their more frequent involvement as defendants and plaintiffs in GATT/WTO trade disputes. This paper provides an initial economic appraisal of developing country performance in the GATT/WTO dispute settlement system. We measure the economic resolution of these disputes through trade liberalisation gains, and our results suggest that developing country plaintiffs have had more success under WTO disputes than was the case under the GATT. We also document evidence on potential determinants of this success: the capacity for plaintiffs to make credible retaliatory threats and the guilty determinations by GATT/WTO panels. Finally, there is also some evidence that developing countries have recognised the importance of retaliatory threats and have responded by changing their pattern of dispute initiation under the WTO to better take advantage of the instances in which they have sufficient leverage to threaten retaliation and induce compliance with GATT/WTO obligations.     

Trade deflection and trade depression

This is the first paper to empirically examine whether a country's use of an import restricting trade policy distorts a foreign country's exports to third markets. We first develop a theoretical model of worldwide trade in which the imposition of antidumping and safeguard tariffs, or “trade remedies,” by one country causes significant distortions in world trade flows. We then empirically test this model by investigating the effect of the United States' use of such import restrictions on Japanese exports of roughly 4800 products into 37 countries between 1992 and 2001. Our estimation yields evidence that US restrictions both deflect and depress Japanese export flows to third countries. Imposition of a US antidumping measure against Japan deflects trade, as the average antidumping duty on Japanese exports leads to a 5-7% increase in Japanese exports of the same product to the average third country market. The imposition of a US antidumping measure against a third country depresses trade, as the average US duty imposed on a third country leads to a 5-19% decrease in Japanese exports of that same product to the average third country's market. We also document the substantial variation in trade deflection and trade depression across different importing countries and exported products.     

Breaking the frame: an analysis of strategic cognition and decision making under uncertainty

This paper reports the findings of two experimental investigations into the efficacy of a causal cognitive mapping procedure as a means for overcoming cognitive biases arising from the framing of strategic decision problems. In Study 1, final year management studies undergraduate students were presented with an elaborated strategic decision scenario, under one of four experimental conditions: positively vs. negatively framed decision scenarios, with prechoice vs. postchoice mapping task orders (i.e., participants were required to engage in cognitive mapping before or after making a decision). As predicted, participants in the postchoice mapping conditions succumbed to the framing bias whereas those in the prechoice mapping conditions did not. Study 2 replicated and extended these findings in a field setting, on a sample of senior managers, using a decision scenario that closely mirrored a strategic dilemma currently facing their organization. Taken together, the findings of these studies indicate that the framing bias is likely to be an important factor in strategic decision making, and suggest that cognitive mapping provides an effective means of limiting the damage accruing from this bias. Copyright © 1999 John Wiley & Sons, Ltd.     

U.S.–Japan and U.S.–China trade conflict: Export growth,reciprocity, and the international trading system

First Japan and more recently China have pursued export-oriented growth strategies. While other Asian countries have done likewise, Japan and China are of particular interest because their economies are so large and the size of the associated bilateral trade imbalances with the United States so conspicuous. In this paper we focus on U.S. efforts to restore the reciprocal GATT/WTO market-access bargain in the face of such large imbalances and the significant spillovers to the international trading system. The paper highlights similarities and differences in the two cases. We describe U.S. attempts to reduce the bilateral imbalances through targeted trade policies intended to slow growth of U.S. imports from these countries or increase growth of U.S. exports to them. We then examine how these trade policy responses, as well as U.S. efforts to address what were perceived as underlying causes of the imbalances, influenced the evolution of the international trading system. Finally, we compare the macroeconomic conditions associated with the bilateral trade imbalances and their implications for the conclusions of the two episodes.     

Trade adjustment in the WTO system: are more safeguards the answer?

For countries to engage successfully in the international tradingsystem, their industries, firms, and workers must respond continuallyto new conditions of competition. The continuing need to adjustarises both from policy changes approved in multilateral negotiations—e.g.implementation of trade liberalization commitments, preferenceerosion, or adverse terms-of-trade consequences of export subsidyelimination—and from ongoing changes in competitive pressuresinherent in a liberal trading system—e.g. effects on comparativeadvantage of changes in technology or factor supplies. But thepolitical response to a situation calling for adjustment isoften a call for ‘safeguards’—whether as anex ante provision in negotiated agreements or as an ex postmeasure once the agreement has been signed and the reality ofnew conditions takes shape. This paper examines the range ofadjustment problems confronting the current and future internationaltrading system, the economic arguments for intervention to dealwith these problems, the adjustment environment as set out inthe current World Trade Organization (WTO) Agreements, and proposalsfor reform. While the adjustment problems we discuss apply toboth rich and poor WTO member countries, we highlight the issuesof adjustment especially relevant for developing countries.     

Preferential Liberalization,Antidumping, and Safeguards: Stumbling Block Evidence from MERCOSUR

There is not yet consensus in the trade agreements literature as to whether preferential liberalization leads to more or less multilateral liberalization. However, research thus far has focused mostly on tariff measures of import protection. We develop more comprehensive measures of trade policy that include the temporary trade barrier (TTB) policies of antidumping and safeguards; studies in other contexts have also shown how these policies can erode some of the trade liberalization gains that arise when examining tariffs alone. We examine the experiences of Argentina and Brazil during the formation of the MERCOSUR over 1990–2001, and we find that an exclusive focus on applied tariffs may lead to a mischaracterization of the relationship between preferential liberalization and liberalization toward non‐member countries. First, any “building block” evidence that arises by focusing on tariffs during the period in which MERCOSUR was only a free trade area can disappear once we also include changes in import protection that arise through TTBs. Furthermore, there is also evidence of a “stumbling block” effect of preferential tariff liberalization for the period in which MERCOSUR became a customs union, and this result tends to strengthen upon inclusion of TTBs. Finally, we also provide a first empirical examination of whether market power motives can help explain the patterns of changes to import protection that are observed in these settings.     

Antidumping and retaliation threats

We propose and test two ways in which retaliation threats may dampen the antidumping (AD) activity we observe. First, the threat of retaliatory AD actions may make a domestic industry less likely to name a foreign import source in an AD petition. Second, the prospect of a GATT/WTO trade dispute may make government agencies less likely to rule positive in their AD decision. Using a nested logit framework, we find evidence that both retaliation threats substantially affect US AD activity from 1980 through 1998.     

Participation in WTO Dispute Settlement: Complainants, Interested Parties, and Free Riders

What affects a country’s decision of whether to formallyengage in a trade dispute directly related to its exportinginterests? This article empirically examines determinants ofaffected country participation decisions in formal trade litigationarising under the World Trade Organization (wto) between 1995and 2000. It investigates determinants of nonparticipation andexamines whether the incentives generated by the system’srules and procedures discourage active engagement in disputesettlement by developing country members in particular. Thoughthe size of exports at stake is found to be an important economicdeterminant affecting the decision to participate in challengesto a wto-inconsistent policy, the evidence also shows that measuresof a country’s retaliatory and legal capacity as wellas its international political economy relationships matter.These results are consistent with the hypothesis of an implicit"institutional bias" generated by the system’s rules andincentives that particularly affects developing economy participationin dispute settlement.     

Trade liberalization, antidumping, and safeguards: Evidence from India's tariff reform

This paper is the first to use product-level data to examine empirically whether countries use antidumping and safeguard exceptions to unwind commitments to lower tariffs in the face of domestic political-economic pressure. We focus on the case of India, a country that underwent a major exogenous tariff reform program in the early 1990s and subsequently initiated substantial use of safeguard and antidumping import restrictions. We first estimate structural determinants of India's import protection using the Grossman and Helpman (1994) model and provide evidence from its pre-reform tariff data of 1990 that is consistent with the theory. We then re-estimate the model on the Indian tariff data after the trade liberalization is complete and find that the model no longer fits, a result consistent with theory and evidence provided in other settings that India's 1991-1992 IMF arrangement can be interpreted as resulting in an exogenous shock to India's tariff policy. However, when we re-estimate the model on data from 2000-2002 that more completely reflects India's cross-product variation in import protection by including both its post-reform tariffs and its additional non-tariff barriers of antidumping and safeguard import protection, the significance of the Grossman and Helpman model determinant estimates is restored. We interpret these combined results as evidence that India unwound its commitment to reduce tariffs through use of antidumping and safeguard protection in the face of political-economic pressure. The estimates are also economically important and provide one explanation for separate results in the literature that the magnitude of import reduction associated with India's use of antidumping is similar to the initial import expansion associated with its tariff reform. Finally, we interpret the implications of our results for the burgeoning research literature examining the effects of liberalization on India's micro-level development.