The Reform of the WTO’s Appellate Body: An Economic Perspective
Yea, Sang jun | May 2021
In this study, I build a game-theoretical model to analyze the impact of AB reform on WTO members’ trade policies and strategic use of DSP. Specifically, I extend Maggi and Staiger (2011), which relates the accuracy of the Dispute Settlement Body’s rulings to the member countries’ trade policies, by allowing the WTO AB to make a strategic decision maximizing the number of proper rulings based on a noisy signal being correlated with the trading countries’ joint payoffs. Consistent with Maggi and Staiger (2011), I find that member countries are more likely to file an appeal to the AB when its interpretation of ambiguous WTO agreements gives rise to uncertainty about AB rulings. However, unlike Maggi and Staiger (2011), this study pins down the informational conditions under which such results arise. With this feature, I argue that activist rulings by the AB should be always uncertain without respect to the realized state in order for the disputing parties to appeal to the AB in equilibrium. Another departure from Maggi and Staiger (2011) is in the area of AB reviews of a respondent’s domestic law. If the AB’s reviewing domestic law significantly affects the defending country’s payoffs, then in equilibrium, appealing to the AB never arises. In the following, I explain the model used to describe the AB’s legal proceedings and member countries’ decisions on trade policy and litigation. Also, I provide several theoretical results that speak to the reform of the WTO AB.
CitationYea, Sang jun. 2021. The Reform of the WTO’s Appellate Body: An Economic Perspective. © Korea Institute for International Economic Policy. http://hdl.handle.net/11540/13703.
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