Maximizing Trade Benefits Through Strategic WTO Dispute Filings: A Quantitative Analysis of Optimal Initiation

Abstract

The study investigates the asymmetrical distribution of bilateral dispute initiations at the World Trade Organization Dispute Settlement System (WTO-DSS) between specific country pairs. The study introduces a novel concept of dispute depth to examine how the asymmetrical bilateral dispute initiation affects bilateral trade among disputing dyads and to optimize the number of disputes that a country should file to maximize its trade benefit. By using the augmented Structural Gravity Model of trade and the PPMLHDFE estimator with extensive trade data for the years 1995–2022, across selected WTO member countries, the article demonstrates that an increase in the dispute depth decreases the bilateral trade between disputing dyads. Further, the study finds that the WTO member countries should strategically file no more than three disputes per year to maximize their trade gains. The study has important ramifications in the ambiguous world of WTO-DSS and paves the way for implementing the optimal number of disputes into trade dispute strategy, policy-making decisions and business environment of the constantly evolving international trade landscape.