<mark>WPS3540</mark>

# **TRADE REMEDIES AND WORLD TRADE ORGANIZATION**

# **DISPUTE SETTLEMENT:**

# **WHY ARE SO FEW CHALLENGED?**

## **Chad P. Bown**<sup>**†,‡**</sup>

**The Brookings Institution & Brandeis University**

## **Abstract**

Antidumping and related trade remedies are the most popular policy instruments that many of the largest importing countries in the World Trade Organization system use to restrict international trade. While such trade remedies are also frequent targets of dispute settlement activity under the WTO, given that Panel and Appellate Body rulings have almost invariably found that some aspect of each reviewed remedy was inconsistent with WTO obligations, an open research question is why aren’t _more_ remedies targeted by dispute settlement? This paper provides a first empirical investigation of the trade remedy and WTO dispute settlement interaction by focusing on determinants of WTO members’ decisions of whether to formally challenge U.S. trade remedies imposed between 1992 and 2003. We provide evidence that it is not only the size of the economic market at stake and the capacity to retaliate under potential Dispute Settlement Understanding-authorized sanctions that influence the litigation decision of whether to formally challenge a measure at the WTO. We also find that if the negatively affected foreign industry has the capacity to directly retaliate through a reciprocal antidumping investigation and measure of its own, its government is _less_ likely to pursue the case on its behalf at the WTO. This is consistent with the theory that potential complainants may be avoiding WTO litigation in favor of pursuing reciprocal antidumping and hence “vigilante justice.” JEL No. F13, K33, K41 Keywords: Trade Disputes, WTO, GATT, Antidumping, Countervailing Duties, Trade Remedies, Retaliation World Bank Policy Research Working Paper 3540, March 2005 _The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org._ ___________________

> **†** Okun-Model Fellow in Economic Studies (The Brookings Institution) and Department of Economics and International Business School (Brandeis University).

> Correspondence: The Brookings Institution, 1775 Massachusetts Avenue, NW, Washington, DC  20036 USA tel: 202-797-6304, fax: 202-797-2478, email: cbown@brookings.edu, web: http://www.brandeis.edu/~cbown/.

> **‡** For helpful discussions and comments on an earlier version of this paper, I would like to thank Alan Sykes, Eric Posner, Tom Prusa, Robert Staiger, Kyle Bagwell, Michael Moore, Nuno Limão, Marc Busch, Susan Collins, Barry Bosworth and seminar participants at the Conference on International Dispute Resolution (University of Chicago Law School), The Brookings Institution, George Washington University and the U.S. International Trade Commission.  A portion of this research was undertaken while I was visiting the Trade Unit in the Development Economics Research Group at the World Bank, which I thank for its financial support. Gloria Sheu and Eric Haven provided outstanding research assistance.