Economic Analysis On The Mechanism Of GATT/WTO Dispute Settlement Body

It is the mechanism of WTO dispute settlement body that specifies the abvious progress during the transition from GATT to WTO. Dispute Settlement Understanding has established a mandatory dispute resolution system with fewer opportunities for delay than that had existed under the General Agreement on Tariffs and Trade. They also eliminated the ability of the losing party to veto the adoption of panel reports. The mechanism of WTO dispute settlement body has played the central role in the trading system and becomes more and more important. But, in the present, we do not have a coherent model of litigation and settlement at the WTO that can explain why some cases complain while others do not, why some cases settle while others enter into Panel procedure, why the case entering into Panel procedure have a very high complainant win rate, why the cases under the mechanism of WTO dispute settlement body have a high appellate rate. This paper provides such a model-asymmetry benefits and cost model which explains the reason of the questions above, and improves our understanding of how the mechanism of GATT/WTO dispute settlement body impacts state behaviors. This article, with the name Economic Analysis on the mechanism of GATT/WTO dispute settlement body, consists four chapters. Chapter one introduces the general situation of the mechanism of GATT/WTO dispute settlement body. In order to studying the economic analysis on the mechanism of GATT/WTO dispute settlement body, we should have a general understanding of the mechanism of GATT/WTO dispute settlement body, and this will gives some hints for the following discussion. WTO mechanism bases on GATT system, specially in dispute settlement mechanism, it is overall new dispute settlement mechanism, and overall adjusts and consummates for the mechanism of GATT dispute settlement body. The most different specify of the mechanism of WTO dispute settlement body relies in anqo-law procedure, including the establishing of Dispute Settlement Body, the strict time restrains of dispute settlement procedures, the approach of inverted consensus and the building of appellate body procedure. Chapter two expatiates the asymmetry information model and theory, in the same time, the fails of the asymmetric information model and theory at the mechanism of GATT/WTO dispute settlement body. Asymmetric information model and theory represent that, in the process of litigation, asymmetric information of both parties will impact the approach of them, and the party will try best to pure the most benefits of itself in the procedure of panel or appellate stage. Because the party of having comparative information advantage has a option that settling with the other party or entering into panel stage, it will has a very high win rate in the process of litigation. The general result is that cases in which the better-informed party is likely to win at trial are less likely to settle, so the cases that go to trial are disproportionately won by the well-informed party. This model and theory, originally, put into force in domestic legal disputes, now has been introduced into studying theGATT/WTO disputes. In effect, in the most situation, the defendant has a comparative information adavantage, because the key information in case-the practice of the defendant-relates to the defendant's own conduct. The defendant is even more likely to have an informational advantage because, unlike the domestic court system, the GATT/WTO does not provide discovery procedures for complainant. If the defendant has informational advantage, it will have a high win rate depend the analysis of information model and theory above. But, in deed, about 90% of cases in which the complainant win. Why have such results, the reason is that the assumption of the complainant is better informed than the defendant is not true, so we reject the asymmetric information mode and theory as an explanation of the international trade disputes. Chapter three discusses the condition and building of the benefits-costs asymmetric model and theory, then, analyzes how the mechanism of GATT/WTO dispute settlement body impacts on state behavior. Benefits-costs asymmetric model and theory is set up, basing on asymmetric information model, not taking asymmetric information as the main apparatus with which to study the subject. Though the report of panel will produce some benefits and costs on parties, those benefits and costs are not equilibrium, asymmetric between the complainant and defendant, and with the feature of "non-zero-sum game". Though we give a condition that the payoffs is economical and monetory, the payoffs in question are political and because they do not take the form of damage payments or any other sort of transfer, they are likely to be asymmetric. In inter-state litigation at the WTO, on theother hand, damages do not have this zero-sum character, state do not generally settle their disputes through cash payments, and the WTO does not compel payment from the loser of a case to the winner. In deed, the WTO dispute resolution system does not provide for any compensation damages at all. After a loss before a panel or appellate panel, the defendant is expected to end the disputed practice but is not liable for its past conduct. Through analyzing the the mechanism of GATT/WTO dispute settlement body with the model and theory of asymmetric benefits-costs, we can conclude that, the complainant will withdraw the case if and only if the expected return less the costs which will pay in the participation in the procedure of the mechanism of GATT/WTO dispute settlement body; inversely, the cases will enter into the panel stage or settlement with the defendant; the settlement range will be affect by the probability of litigation, the costs of litigation, expected payoffs and delay payoffs. The settlement range gets smaller as the probability of a complainant victory rises, gets bigger as the costs of litigation rises, gets smaller as the expected payoffs of the defendant reduces and the delay payoffs of the defendant rises, gets smaller as the expected payoffs of the complainant rises and the delay payoffs of the complainant reduces. In the condition of loss, not only the complainant but also the defendant will have expected payoffs if the cases enter into appellate procedure, in the same time, will be not pay any costs of litigation. So, both the complainant and the defendant will take the case into the appellate procedure if they lose in the panel stage. Chapter four draws three inferences from the evidence about the political...