Visiting Lecturer Program (10)

Speaker: Mostafa Beshkar
Ph.D. Candidate
Department of Economics, Vanderbilt University
Local Organizer: Mazdak Mohtasham and Navid Ghaffarzadegan

Title: Dispute Resolution in the World Trade Organization

Time: July 2006
Location: School of Management and Economics, Sharif University of Technology, Tehran

Abstract:

This talk will be on the economics and politics of dispute resolution in the World Trade Organization (WTO). The Dispute Settlement Process (DSP) of WTO is designed to help the member countries to resolve their disputes over trade policies. Even though this process is a rules-based system, it has no external enforcement power to ensure compliance with its findings. Therefore, the WTO-DSP is similar to a diplomatic process in which relative power of the parties, rather than the rules, determine the outcome of disputes. This has led many observers to question the usefulness of the WTO dispute settlement process, particularly for politically weaker members of the WTO. Using a data set on the WTO dispute cases, I compare the hypothesis that dispute resolutions are outcome of a diplomatic process against the hypothesis that these outcomes are formed in accordance with the predetermined rules.

The efficiency of the legal activities under WTO will be also discussed. Since engaging in DSP can be quite costly, efficiency requires early settlements between disputants in order to avoid costs of litigation and negotiations. However, only 45 percent of all disputes are resolved in the primary (consultation) stage, while more than 30 percent of cases reach the Appellate Body ruling or further stages. Using a game-theoretic model with asymmetric information between member countries, I explain how asymmetric information can lead to inefficiency in negotiations and to prolonged negotiations.