Empirical Study On The Effectiveness Of WTO Dispute Settlement Mechanism

Dispute Settlement Mechanism (DSM) is an important pillar for multilateral trade system and at the core of WTO system. It provides certainty, stability and predictability for the good operation of world trade system. Compared with GATT dispute settlement mechanism, WTO dispute settlement system is equipped with incomparable advantages with special dispute settlement body and rules, and revolution on dispute settlement procedures, voting system and execution supervision mechanism. Because of this, WTO member states had great expectations for it. However, through statistical analysis, this paper found that WTO dispute settlement mechanism does not play its role as expected. Main defects are such as:the proportion of cases resorted to the dispute settlement mechanism among global trade disputes is relatively small, participation of developing countries is not enough and dispute resolution process and execution are unsatisfactory and time consuming. This paper also found China is lack of enthusiasm in using dispute settlement mechanism, though she is the main victim of trade protectionism. Cases china issued to DSB is much less than USA and EU, even less than other developing countries such as Mexico and India.This paper also selected cases issued and ended from 1995 to 2005 for econometric analysis, further discussing the factors impact bilateral trade, which represents the effectiveness of WTO dispute settlement mechanism. The empirical results shows that time spent on dispute settlement has significantly negative influence on bilateral trade, plaintiff country that exports more disputed goods to defendant country tends to obtain greater liberalization in disputed sector, ruling against defendant country help to realize liberalization in defendant country, as it increased its political cost and loss on national reputation. In theory, the larger export proportion of defendant country to plaintiff country, the stronger retaliation power that the plaintiff country has, however, this factor is not significant.Based on the above analyses, this paper discussed the defects of WTO dispute settlement mechanism from the prospect of institutional economics, and provided suggestions on how to make improvement on it. Meanwhile, through the analysis of China's participation in dispute settlement, this paper also made suggestion on how to make better use of the dispute settlement mechanism.