_dispute_ negotiations. While the size of the policy movements associated with disputes are notoriously difficult to measure accurately because disputed policies are typically applied as non-tariff barriers, the timing of such policy changes are readily observable. We therefore use an explicit theory to map what we can better observe and measure, namely data on trade volumes and prices, to an empirical framework to estimate the determinants of trade dispute outcomes.

We estimate the model on a new data set of the trade volume outcomes deriving from formal WTO disputes initiated and legally concluded between 1995 and 2009, and we provide evidence that determinants of the trade flows that result from dispute settlement negotiations are consistent with theoretical predictions. In particular, larger post-dispute trade volume outcomes are associated with products that have smaller increases to exporter-received prices (terms-of-trade losses) resulting from the conclusion of the dispute, larger pre-dispute trade volumes, larger import demand and smaller foreign export supply elasticities. The resulting estimates on these theoretical predictions are economically significant. Finally, we are also able to confirm that results from related research apply to this setting of trade policy negotiations; i.e., that negotiated trade policy outcomes arising under dispute settlement are also impacted by asymmetries in bilateral retaliation capacities and variation in exporting country concentration, the latter of which contributes to identifying the potential severity of the free rider problem of collective organization.

Overall, our results provide further evidence not only of the relevance of the terms-of-trade theory of trade agreements, but also that terms-of-trade motives are not completely extinguished when countries take on binding commitments under trade agreements such as the WTO. The determinants of the trade volume response associated with respondent importing countries changing their policies after formal WTO dispute settlement include concern for direct, within-market termsof-trade losses (increases in exporter-received prices for the product under dispute) as well as the potential desire to avoid terms-of-trade losses in other markets (decreases in own exporter-received prices) under potentially WTO-authorized trading partner retaliation.

These results also suggest an important avenue for the increasingly prominent theoretical literature on the design of dispute resolution procedures (e.g., Maggi and Staiger 2011, forthcoming). Our evidence is that the successful resolution to a trade dispute - e.g., the importing country’s relaxation of an excessively restrictive policy - may be made more difficult, the larger is the (within-market) change in the terms-of-trade associated with the post-dispute policy change. That is, terms-oftrade incentives continue to affect trade policy decisions even after a country is a member of a trade agreement and bound by its legal provisions. Future work might explore the implications of embedding these new theoretical frameworks for dispute resolution into more complete models of trade agreements, especially those motivated by international cost-shifting concerns (e.g., Bagwell and Staiger 1990, 1999).

Finally, our evidence does leave unanswered the question of what determines the negotiated outcomes for the significant number of disputes involving developing countries. While the lack of relevance of the terms-of-trade model for the developing country disputes may suggest that such countries are using the WTO as a commitment device vis-a-vis their private sectors rather than to 27