When are International Institutions Effective? The Impact of Domestic Veto Players on Compliance with WTO Rulings

Abstract

Abstract When do international institutions promote economic cooperation among countries? The World Trade Organization (WTO) is central to the multilateral trade regime and a benchmark for international dispute resolution. Yet it remains unclear whether it has been effective in restoring trade cooperation. This article uses WTO disputes to examine the impact of domestic politics in the defendant country on compliance with adverse legal rulings. I build a novel data set on compliance. Using the method of synthetic case control, I estimate the effect of adverse rulings on trade flows between disputant countries using product-level time-series trade data. I infer the defendant complied if trade flows increased after the dispute, relative to estimated levels that would have occurred in the absence of the ruling. The results show domestic political divisions—measured by veto players—hinder compliance.