capacity to enforce their market access interests.<sup>134</sup> Beginning with Horn, Mavroidis and Nordstrom (2005), the evidence indicates strong correlations between dispute settlement use, the level of country’s exports, and the diversity of its trading partners. The more a country traded and the more bilateral trading relationships that it had, the greater the scope for potential frictions to arise that would result in a formal dispute. Subsequent research on disputes from the early WTO period that also explored the potential role of other factors - such as legal and retaliatory capacities - that might a¤ect dispute initiation tended to con...rm the central importance of the result that high levels of trade were positively correlated with the triggering of disputes.<sup>135</sup> Nevertheless, Bown and Reynolds (2015) characterize the bilateral trade in disputed products for a sample of disputes making up more than 70 percent of the WTO caseload between 1995 and 2011 and ...nd evidence of vast heterogeneity in the levels of market access at stake. Roughly 14 percent of WTO disputes involve bilateral trade in disputed products of tiny amounts –e.g., less than $1 million per year - and yet 15 percent of disputes involve bilateral trade in products over more than $1 billion per year. The heterogeneity in trade stakes across the dispute data raises research questions regarding determinants of dispute settlement use. Some of the new theoretical advances described below may improve our understanding of these forces.

The Bown and Reynolds (2015) evidence also suggests that WTO member countries in the aggregate have entrusted the dispute settlement system to assess policies that cover signi...cant amounts of trade. Over 1995-2011, WTO dispute settlement investigations collectively scrutinized nearly $1 trillion in goods imports, an average of $55 billion per year, or roughly 0.5 percent of world imports in 2011.<sup>136</sup> These are arguably signi...cant amounts of trade for dispute settlement to address, without even yet considering the impact of the potential precedent arising through WTO jurisprudence, as well as the “o¤-equilibrium”impacts of the system.

# 7.1.2 The WTO legal process and outcomes

If the mandatory consultations with the respondent resulting from the initiation of a formal dispute fails to resolve the issue, the complainant country can trigger a formal legal process whereby the legal representatives of the two sides make arguments and present evidence to a WTO dispute settlement Panel. Nearly 200 of the roughly 500 WTO disputes initiated to date have resulted

> 134 Bown (2009) provides a more comprehensive and in depth treatment of these and related issues confronting developing country access to WTO dispute settlement.

> 135 Bown (2005a), for example, provides evidence linking higher import penetration ratios to US antidumping duties in the ...rst stage, and higher levels of bilateral trade a¤ected by those US duties subsequently positively associated with the trading partners decision of whether to formally challenge them through GATT/WTO dispute settlement in a second stage. In a separate study examining a cross-country sample of WTO disputes that concern policies imposed on a national treatment basis –in which the policy negatively a¤ected all trading partners –Bown (2005b) ...nds that higher pre-policy levels of bilateral exports of the disputed products are positively associated with potential litigants’ decision of whether to formally engage in the dispute settlement process.

> 136 These are conservative statistics because they do not include roughly 30 percent of the WTO caseload of disputes that are either tied to export policies, services policies, TRIPS, or policies that a¤ect all imports and are not linked to speci...c product codes. The overall level of trade directly a¤ected by WTO disputes is likely to be much higher.

85