Previous studies of WTO dispute settlement have sought to evaluate whether a Member's legal capacity influences its odds of bringing litigation before the multilateral trade regime. Because direct measures of legal capacity are elusive, these studies have had to use indirect proxies, such as per capita income or number of delegates in Geneva. Yet, the reliability of these measures is questionable. To gauge legal capacity more directly, we surveyed all WTO Members, posing questions concerning their professional staff, bureaucratic organization at home, bureaucratic organization in Geneva, experience handling general WTO matters, and involvement in WTO litigation. Using responses from this survey, we constructed an index of Members' WTO legal capacity that speaks more fully to the challenges of dispute settlement than do commonly used proxies, none of which are strongly correlated with our measure. We supplemented this survey with over three dozen semi-structured interviews with Members' representatives in Geneva, the results of which bear out the importance of properly measuring legal capacity.

This paper surveys a wide body of economic literature on the relationship between exchange rates and trade. Specifically, two main issues are investigated: the impact of exchange rate volatility and of currency misalignments on international trade flows. On average, exchange rate volatility has a negative (even if not large) impact on trade. The extent of this effect depends on a number of factors, including the existence of hedging instruments, the structure of production (e.g. the prevalence of small firms), and the degree of economic integration across countries. The second issue involves exchange rate misalignments, which are predicted to have short-run effects in models with price rigidities. However, the exact impact depends on a number of features, such as the pricing strategy of firms engaging in international trade and the importance of global production networks. Trade effects of currency misalignments are predicted to disappear in the long-run, unless an economy is characterized by other relevant distortions. Empirical results broadly confirm these theoretical predictions.

Notwithstanding the tariffication component of the Uruguay Round Agreement on Agriculture, import tariffs on farm products continue to provide an incomplete indication of the extent to which agricultural producer and consumer incentives are distorted in national markets. As well, in developing countries especially, non-agricultural policies indirectly impact on agricultural and food markets. Empirical analysis aimed at monitoring distortions to agricultural incentives thus need to examine both agricultural and non-agricultural policy measures including import or export taxes, subsidies, and quantitative restrictions plus domestic taxes or subsidies on farm outputs or inputs and consumer subsidies for food staples. This paper addresses the practical methodological issues that need to be faced when attempting to undertake such a measurement task in developing countries. The approach is illustrated in two ways: by presenting estimates of nominal and relative rates of assistance to farmers in China for the period 1981–2005; and by summarizing estimates from an economy-wide CGE model of the effects on agricultural versus non-agricultural markets of the project's measured distortions globally as of 2004.

We use new data on trade and production in 167 countries to infer estimates of trade costs for manufactured goods and agriculture for 1996‒2010. Trade costs are strongly declining in country income level. Among developing countries, only the upper middle income group has been successful in reducing trade costs faster than elsewhere in the world. Sub-Saharan African countries and low income countries remain subject to very high trade costs. Regional trade agreements, maritime transport connectivity, and trade facilitation performance are important determinants of trade costs.

Central bank intervention in foreign exchange markets may, under some conditions, stimulate exports and retard imports. In the past few years, this issue has moved to center stage because of the foreign exchange policies of China. Numerous public officials and commentators argue that China has engaged in impermissible ‘currency manipulation’, and various proposals for stiff action against China have been advanced. This paper considers the relationship between exchange rate policy and international trade, and addresses the questions of whether and how currency manipulation should be addressed by the international trading system. Our conclusions are at odds with much of what is currently being said by proponents of multilateral or unilateral actions against China. In particular, we question whether China's practices can be adjudicated to be ‘manipulation’ under international law, and doubt that their trade effects can be identified with the degree of confidence necessary to ascertain whether the practices ‘frustrate the intent’ of WTO/GATT commitments. The difficulty of identifying the trade effects of currency practices undermines the ability of the WTO dispute resolution system to address them, and calls into question the wisdom and legitimacy of unilateral countermeasures that have been proposed in various quarters.

Despite the successful launch of a new round of multilateral trade negotiations at Doha, the World Trade Organization faces a legitimacy crisis. Protests continue to rock major international economic meetings, and the WTO's role in globalization is being questioned by many observers. This paper examines the contours of this crisis and explores the possibility that the WTO's indirect ties to popular sovereignty – through national governments – provide an insufficient foundation for the trade regime's authority and central role in the emerging structure of global governance. Arguing that the WTO needs to re-establish its legitimacy based on wider links to the public around the world in whose name freer trade is pursued, the paper suggests that the WTO must also re-build its reputation for efficacy in a context where success is no longer measured exclusively in narrow economic terms. To be seen as serving the interests of the world community broadly, the trade regime needs to pursue its economic goals in a fashion that shows sensitivity to other important goals and values, such as poverty alleviation, environmental protection, and the promotion of public health. Long-term success further depends on the trade regime becoming embedded within a broader structure of global governance that provides ‘checks and balances’ and reinforces the legitimacy of international trade policy making.

Preferential trade agreements are an important feature of the global trade system. Several questions, ranging from the rationale for preferential arrangements to their impact on members, non-members and the broader multilateral trade system, are at the forefront of academic and policy debates in trade policy. This paper presents a new database that offers a detailed assessment of the content of preferential arrangements, examining the coverage and legal enforceability of provisions regulating a large set of policy areas. The database provides information on 279 agreements signed by 189 countries between 1958 and 2015. The analysis of the data confirms one of the key insights in the literature: preferential trade agreements are becoming deeper over time. A growing number of these treaties regulate an extended set of policies, frequently with legally enforceable provisions, in areas under the current World Trade Organization mandate and in areas outside the current World Trade Organization mandate, especially competition policy, investment, movements of capital, and intellectual property rights protection. Accounting for the changing scope of preferential trade agreements is essential to gain a more complete and accurate understanding of where the global trading system is going and how its governance can be improved.

The creation of the WTO revived the use of ‘safeguard’ measures to protect troubled industries against surges in import competition. Many of these measures have now been challenged in the WTO dispute resolution process, and in each case the process has found the challenged measure to be a violation of WTO law. This paper examines the WTO rules on safeguards from an economic perspective. Among other things, it argues that the textual preconditions for the use of safeguards in the treaty text are incoherent, and that the Appellate Body has compounded the problem through a series of dubious and unhelpful rulings. The result is a situation in which nations cannot use safeguards without facing a near certainty that they will be found invalid. Those who believe that safeguard measures are wasteful protectionism may welcome these developments, but it is by no means clear that the trading system will benefit in the long run.

This paper attempts to fill a gap in the trade literature by providing a comprehensive overview of services liberalization commitments in the new generation of preferential trade agreements (PTAs) as compared to prevailing GATS commitments and Doha Round offers. The paper reviews the commitments undertaken by 36 WTO Members (counting the EC as one) under mode 1 (cross-border supply) and mode 3 (commercial presence) in 32 PTAs negotiated since 2000. Among other things, the results suggest that, overall, PTA commitments tend to go significantly beyond GATS offers. Countries that have signed PTAs with the United States have made spectacular improvements, but GATS+ commitments are not limited to such agreements. The paper also discusses the potential economic costs arising from these preferential agreements and implications for the role of GATS and for multilateral services negotiations. The paper concludes by exploring possible approaches to overcome the downsides of services PTAs, including suggestions for a more pro-active role for the WTO in the surveillance of these agreements.

As global data flows and digital technologies transform international trade, governments and regulators have to determine how to benefit from these developments while maintaining the integrity of their domestic regulations. Currently, governments are increasingly restricting global data flows and requiring data localization, undermining the economic benefits of digital trade. To address this trend will require a system of digital trade governance that has two key elements. One element is new digital trade rules, some of which exist in the WTO and others which are being developed in free trade agreements. The other is international regulatory cooperation to develop standards and mutual recognition agreements in areas such as privacy and consumer protection that gives domestic regulators confidence that allowing data to leave their jurisdiction will not undermine achievement of domestic regulatory goals. In the absence of such regulatory cooperation, governments are likely to continue to restrict data flows, relying on the exceptions provisions to their digital trade commitments.

We present a new dataset of international trade costs in services sectors. Using a theory-based methodology combined with data on domestic shipments and cross-border trade, we find that trade costs in services are much higher than in goods sectors: a multiple of two to three times in many cases. Trade costs in services have remained relatively steady over the last ten years, whereas trade costs in goods have fallen overall at an impressive rate. We show that even in a regional grouping that has done much to promote a single market in services–the EU–there remains considerable heterogeneity in trade costs across countries. Our findings generally suggest an important role for future policy reforms to reduce the regulatory burdens facing services sectors and facilitate trade in services.

Mitigating the impact of the economic crisis will require using all the tools necessary to regain a sustainable path to growth. This includes measures to support trade expansion, including in developing countries, such as those in Africa. This paper provides context for understanding why trade facilitation and lowering trade costs matter to Africa both today and over the long term. Trade costs are higher in Africa than in other regions. Using gravity-model estimates, the authors compute ad-valorem equivalents of improvements in trade indicators for a sample of African countries. The evidence suggests that the gains for African exporters from cutting trade costs half-way to the level of Mauritius has a greater effect on trade flows than a substantial cut in tariff barriers. As an example, improving logistics so that Ethiopia cuts its costs of trading a standardized container of goods half-way to the level in Mauritius would be roughly equivalent to a 7.6% cut in tariffs faced by Ethiopian exporters across all importers.

This paper uses a newly collected dataset on business costs to investigate empirically whether small and remote economies are inherently uncompetitive. Although in theory these economies can overcome their small size by specialising and trading, this may not be enough to generate acceptable incomes because they face a combination of diseconomies of small scale and high transaction costs. We conclude that there are almost certainly some very small economies for which this is true. These economies are likely to become less attractive for commercial activities as globalization proceeds and their current trade preferences are eroded. The policy solution is not protection, however, but proactive policies from the international community.

This paper quantifies the effect of GMO regulation on bilateral trade flows of agricultural products. We develop a composite index of GMO regulations and using a gravity model we show that bilateral differences in GMO regulation negatively affect trade flows. This effect is especially driven by labeling, approval process, and traceability. Our results are robust to the endogeneity of GMO standards to trade flows.

This paper provides a systematic welfare-based approach to analyze the impact of non-tariff measures (NTMs) on trade and welfare in the presence of market imperfections. It focuses on standard-like measures such as technical barriers and sanitary and phytosanitary regulations. The approach overcomes the shortcomings of the mainstream approach based on the analysis of foregone trade caused by trade costs. The latter ignores market imperfections, and welfare is found to increases when NTMs are reduced and trade expands. We explain how to account for external effects and market failures in trade-focused welfare analysis, leading to a more balanced overall assessment of measures despite a potential reduction of trade flows. The relationships between trade, welfare, and NTMs are complex, and generalizations are best avoided. Very often, the optimum NTM is not the absence of regulation. An application to shrimp trade illustrates the feasibility of the proposed approach. The illustration shows that the reinforcement of a food safety standard can be socially preferable to the status-quo situation, both domestically and internationally.

The openness of the World Trade Organization (WTO) towards non-state actors has led to much debate among scholars and practitioners. The objective of this paper is to add empirical knowledge to this ongoing debate. In particular, we examine the effects of allowing interest groups to participate at WTO Ministerial Conferences (MCs) during 1996–2009 by analyzing a novel dataset of 1992 interest organizations that attended seven MCs. The data we present demonstrate that, in contrast to what many expected, the WTO did not attract a more diverse population of interest groups since these organizations were allowed to participate at MCs. Moreover, we observe an increasing overrepresentation of some specific issue-related interests, especially agriculture, and a strong presence of Northern American and European interest organizations attending MCs. Another important observation is that MCs are not particularly dominated by business interests at the expense of NGOs (non-governmental organization), who are also consistently well represented at the WTO meetings. Yet, the high levels of volatility observed at the level of individual organizations suggests that, although it is rather easy to start lobbying at WTO MCs, only a relatively small number of interest organizations keep a long lobbying presence at this level.

Although developing countries vary significantly in terms of trading profiles, they generally face three primary challenges if they are to participate effectively in the WTO dispute settlement system. These challenges are: (i) a relative lack of legal expertise in WTO law; (ii) constrained financial resources, including for the hiring of outside counsel; and (iii) fear of political and economic pressure. We can roughly categorize these challenges as constraints of law, money, and politics. This article explores various strategies for responding to these challenges, none of which involves a modification of the rules of the WTO's Dispute Settlement Understanding.

Building on earlier work by Estevadeordal (2000), we construct a synthetic index (R-index) intending to capture the restrictiveness of rules of origin in preferential trading agreements. The R-index is applied to NAFTA and the Single List of the EU's PANEURO system covering all of the EU's preferential trade agreements. The R-index highlights how a common set of rules of origin can affect countries differently depending on their export structures, and how their complexity varies across sectors. Having controlled for the extent of tariff preference at the tariff-line level, the R-index contributes to explain differences in the rate at which preferences are used. Finally, we compute estimates of the compliance costs associated with rules of origin under NAFTA and under PANEURO and find them to be between 6.8% of good value (NAFTA) and 8% (PANEURO).

Transparency, one of the fundamental norms of the trading system, is increasingly seen as an essential tool in the governance of international trade. Enhanced monitoring and surveillance of emergency measures was central to the international effort to mitigate the effects of the financial crisis that began in 2008. This paper develops a new analytic framework for thinking about WTO transparency provisions. We apply this framework to a detailed case study of the Agreement on Subsidies and Countervailing Measures, and then compare this experience to other domains within the WTO. We show that the WTO's windows on the trading system are cloudier than they ought to be. We conclude with some recommendations for improving WTO transparency tools.