Dispute initiation

First, we propose to collect additional data to measure “legal capacity”. At present, no high quality time-series data for legal capacity of WTO member countries exists. This poses serious endogeneity problems: in particular, we cannot control for the possibility that prior involvement in, or the expectation of becoming involved in more disputes, leads to greater legal capacity (rather than greater capacity promoting dispute initiation). Hence we seek to advance research on whether legal capacity is indeed a problem that discriminates against poorer WTO members.

Second, recent work suggests that gravitation caused by economic size of countries and bilateral trade volumes is an important driver of trade dispute initiation. To investigate the causal mechanisms behind this effect in more detail, we will collect data on trade diversity and other variables that may proxy more directly for the effects of economic size and trade on the probability of a country to be involved in a WTO dispute.

Third, the research emphasised in points 1 and 2 do not take into account the possibility that characteristics of trade issues may affect the probability of dispute initiation. Building on earlier work that analyses whether certain types of trade issues are more prone to escalation into formal WTO disputes (e.g. environment, health and safety issues) we propose to develop a game theoretic model and to engage in more extensive empirical testing of the hypotheses it generates.