HOW DOES THE WTO DISPUTE SETTLEMENT MECHANISM WORK FOR WTO MEMBERS? A COMPARATIVE ANALYSIS OF DEVELOPED AND DEVELOPING COUNTRIES

The WTO dispute settlement mechanism (DSM) is now facing a crisis of paralysis. Given such a challenging environment, this study examines factors affecting the participation of the WTO DSM by using bilateral data of WTO members from 1995 to 2017. Moreover, we provide a comparative analysis of the factors affecting the filing of cases at the WTO DSM between developed and developing countries across this period. By conducting the rare-event logistic regression method, we find that the export intensity, retaliation capability, economic power and economic threat are the main factors determining the initiation of trade disputes by WTO members. Moreover, the results from seemingly unrelated regressions suggest that economic power, proxied by the complainant country's gross national income, is not a vital issue of importance that developed countries need to consider when deciding to initiate trade disputes; however, in contrast, developing countries still see it as an important factor affecting the use of DSMs, especially when the target countries are developed countries. Nonetheless, it is worth noting that in the later stage of the WTO, the impact of economic power no longer has any differential influence. On balance, these results reflect the efforts of the WTO to build a fair and rule-based DSM while also highlighting the urgent practical significance of maintaining a solid and effective mechanism for handling international trade disputes.