Free Riding on Enforcement in the World Trade Organization

Many policies that appear to violate WTO rules remain unchallenged, even as they have a significant economic impact. Why is this? We argue that the likelihood that a country challenges a protectionist policy is linked to how concentrated or diffuse that policy is. When it is concentrated, litigation...

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Bibliographic Details
Published in:The Journal of politics 2018-07, Vol.80 (3), p.873-889
Main Authors: Johns, Leslie, Pelc, Krzysztof J.
Format: Article
Language:English
Subjects:
Collective action
Disputes
Economic impact
Enforcement
Free trade
International law
International trade
Leverage
Litigation
Meaning
Selection effects
Trade disputes
Violations
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Summary:Many policies that appear to violate WTO rules remain unchallenged, even as they have a significant economic impact. Why is this? We argue that the likelihood that a country challenges a protectionist policy is linked to how concentrated or diffuse that policy is. When it is concentrated, litigation is a private good. But when a policy is diffuse, affecting many states, litigation is a public good and countries face a collective action problem: each country seeks to free ride on others’ litigation. The resulting selection effect has two consequences. First, we see a longer enforcement delay for diffuse trade violations. Second, states require higher odds of success to overcome the collective action problem, meaning that conditional on being filed, cases that challenge concentrated policies are less likely to succeed. Examining all WTO disputes, we leverage selection effects to test our argument using data on the timing and outcomes of trade disputes.
ISSN:0022-3816
1468-2508
DOI:10.1086/697463