In China–Audiovisuals, a series of Chinese restrictions on the importation and distribution of certain ‘cultural’ or ‘content’ goods and services were found to violate GATT, GATS, and China's Accession Protocol. This paper reviews the definition of what is a ‘good’ (is a ‘film’ a good or a service?) and the extent to which GATT Article XX exceptions can justify violations under WTO instruments other than the GATT itself. We argue that trade volumes are unlikely to significantly rise as a result of this ruling as it does not affect China's right to keep out foreign films and publications if China finds them objectionable. However, foreign producers of audiovisuals can now gain potentially large economic rents, by being able to export and distribute their products into the Chinese market. Finally, we discuss the issue of the protection of cultural goods and review the recent literature on trade and culture that has put forward economic arguments to justify, under some conditions, the protection of cultural goods.

There is no consensus in the literature on whether preferential trade agreements help or hinder trade liberalization toward non-members. We examine the link between preferential trade liberalization and tariffs imposed against non-member countries for the case of CAFTA-DR. Using product data at the 6-digit HS level, we find that products with larger reductions in preferential tariffs experienced larger increases (or smaller decreases) in most-favored nation tariffs applied against non-members. However, we also uncover some interesting dynamics regarding the relationship between preferential liberalization and tariffs imposed against non-members. When we split the sample period into two sub-periods, we find an initial negative relationship between changes in preferential and most-favored nation tariffs during the first half of the sample period, followed by a positive relationship during the second half, although the evidence on the latter is not as strong. The results thus provide the first evidence of an initial stumbling block effect of preferential trade liberalization on unilateral liberalization, as well as (weaker) evidence of a subsequent building block effect.

Based on the reasoning of the Appellate Body in Canada/United States – Continued Suspension of Obligations in the EC–Hormones Dispute (‘Continued Suspension’), this paper analyzes the distinction between the national-treatment obligation under Article III of GATT and the requirement under the Agreement on Sanitary and Phytosanitary (SPS) Measures that such measures be based on a risk assessment that takes into account available scientific evidence. The Appellate Body's reasoning makes clear that the primary purpose of the SPS Agreement is to discipline discriminatory regulation, and not the level of protection. We argue that the case clarifies that de facto protection (market segmentation) created by an SPS measure must be motivated by demonstrating that the measure is addressing a market failure, as reflected in the existence of some scientific basis for a health or safety concern. The scientific-basis requirement is a means for determining the intent of an SPS measure. While this is a factor that is ostensibly not relevant in GATT national-treatment cases, the need for scientific justification is not a move away from a concern with preventing illegitimate discrimination against imported products.

This paper presents a legal–economic analysis of the Appellate Body's decision in EU–Biodiesel (Argentina) that the WTO's Anti-Dumping Agreement (ADA) does not permit countries to take into account government-created price distortions of major inputs when calculating anti-dumping duties. In this case, the EU made adjustments to the price of biodiesel's principal input – soybeans – in determining the cost of production of biodiesel in Argentina. The adjustment was made based on the uncontested finding that the price of soybeans in Argentina was distorted by the existence of an export tax scheme that resulted in artificially low soybean prices. The Appellate Body found that the EU was not permitted to take tax policy-induced price distortions into account in calculating dumping margins. We analyze the economic rationale for Argentina's export tax system, distortions in biodiesel markets in Argentina and the EU, and the remaining trade policy options for addressing distorted international prices. We also assess whether existing subsidies disciplines would be more effective in addressing this problem and conclude that they would not.

Despite many legal rulings to clarify the WTO inconsistency of zeroing practices, in practically all aspects of antidumping proceedings, the United States declined to categorically rectify the illegal antidumping duties based on zeroing calculation methods. This dispute is merely example of a number of disputes where the US government had to exhaust the whole process for proper implementation of the WTO rulings under its domestic legal system. The US approach is starkly contrasted with the position taken by the European Union that categorically terminates zeroing practices pursuant to the WTO rulings. While the WTO system indeed recognizes individual Member's peculiar regulatory systems and policies during implementation phases, the current situation in which WTO Members must individually resort to the dispute settlement system in order to rectify the US zeroing practices raises a serious concern regarding the legitimacy and integrity of the WTO dispute settlement system. Maybe it is time for WTO Members to agree on better implementation mechanisms before more Members try to develop overly burdensome and complicated regulatory processes for compliance.

All but one WTO member currently trade under one or more preferential trade agreements (PTAs). Despite the concern since the early 1990s that these agreements may be a stumbling block to multilateral trade liberalization (MTL) their numbers have risen at an increasing rate in the last 15 years. As preferential liberalization appears to become the rule rather than the exception, it is essential to ask whether there is evidence that it affects MTL. To do so we analyze recent empirical research that finds the US's and EU's PTAs were a stumbling block to their MTL in the Uruguay Round. We also propose new empirical work to answer more definitively whether PTAs are a stumbling block to worldwide MTL.

This paper uses detailed data on bound and applied tariffs to assess the consequences of the WTO's December 2008 Modalities for tariffs levied and faced by developing countries, and the welfare implications of these reforms. We find that the tiered formula for agriculture would halve tariffs in industrial countries and lower them more modestly in developing countries. In non-agricultural market access (NAMA), the formulas would reduce the tariff peaks facing developing countries and cut average industrial country tariffs by more than a third. We use a political-economy framework to assess the implications of flexibilities for the size of the tariff cuts and find they are likely to substantially reduce the outcome. However, despite the flexibilities, there are likely to be worthwhile gains, with applied tariffs facing developing countries cut by about 20% in agriculture and 28% in NAMA, and sizeable cuts in tariffs facing industrial countries. The welfare impacts of reform are evaluated using a new approach to aggregation that improves on the traditional, flawed approach of weighted-average tariffs. This substantially increases the estimated benefits of an agreement along the lines of these modalities, with estimated global income gains of up to $160 billion per year from market access reform.

Trade negotiators and policy advisors are keen to know the relative contributions of different farm policy instruments to international trade and economic welfare. Nominal rates of assistance or producer support estimates are incomplete indicators, especially when (as in many developing countries) some commodities are taxed and others are subsidized, in which case positive contributions can offset negative contributions. This paper develops and estimates a new set of more-satisfactory partial equilibrium indicators of the relative contribution of different farm policy instruments to reductions in agricultural trade and welfare. It does so by drawing on the trade restrictiveness index literature and a recently compiled database on distortions to agricultural prices for 75 developing and high-income countries over the period 1960 to 2004. Results confirm earlier findings that border taxes are the dominant instrument affecting global trade and welfare, but they also suggest declines in export taxes contributed nearly as much as cuts in import protection to the trade and welfare effects of agricultural policy reforms since the 1980s.

We examine the impact of the World Trade Organization (WTO) Government Procurement Agreement (GPA) on government procurement practices in the European Union (EU). We analyse empirically whether the WTO GPA is effective in promoting non-discriminatory, open, transparent, competitive, and cost-effective government procurement. To study this question, we use a unique data set recently released by the EU, covering more than three million tenders conducted in the European Economic Area, Switzerland, and Macedonia during the years 2006–2016. We find that the WTO GPA promotes competition by increasing the probability of awarding a contract to a foreign firm. In addition, the WTO GPA significantly lowers corruption risk by decreasing the number of contracts with single bidders, and by decreasing total number of wins by a single firm. Finally, the WTO GPA fosters cost-effective public procurement by lowering the probability that the procurement price is higher than estimated cost.

There are two widely accepted explanations of why politically motivated governments make trade agreements. There is an informal explanation, which I shall call the ‘practitioners' story’, even though it is most economists' informal view as well. And there is a formal explanation in the economics literature, which I shall call the ‘standard model’, referring to the basic structure shared by the Bagwell–Staiger and Grossman–Helpman models. Unfortunately, the practitioners' story and the standard model contradict each other at every crucial point. For example, in the practitioners' story, trade agreements are about reducing politically motivated protectionism; and getting an agreement depends on political support from exporters. But in the standard model, trade agreements never reduce such protectionism; and politics plays no role in securing an agreement. This paper expounds the contradictions between the practitioners' story and the standard model, which have gone largely unremarked. It refutes suggestions by defenders of the standard model that the contradictions are illusory. It identifies the different assumptions made by the two explanations that generate the contradictions. It gives reasons for skepticism about the standard model. And it discusses why all of this matters.

This article discusses the future of benchmarking after the Canada–Renewable Energy/FIT case. This decision left us with bad law. Assuming that any momentous shift, especially in the current regulatory framework that does not provide for any express justification for good subsidies, is difficult, we speculate on what may lie ahead for future litigants and the dispute settlement. Either ‘a wide’ or ‘a narrow road’ can now be followed. After outlining the risks that a normalization and expansion of this ruling may pose (the ‘wide road’), we have responded to the call for clarification and narrowing of this case (the ‘narrow road’) and speculated on how this could be done. The EU Altmark decision of the European Court of Justice, which was certainly on the minds of the EU litigators and whose ethos the Appellate Body embraced by referring to the use of ‘price-discovery mechanisms’, has inspired the analysis. The exercise has, however, exposed many challenges and difficulties, many of them having already occurred in EU law. The amount of helpful clarification the WTO judicature could offer is thus limited, and would probably be restricted to taking the link between market definition and benchmarking seriously. This unsatisfactory conclusion leads to suggest, once again, law reform as the only solution to the current status quo.

Fossil fuel subsidies undermine efforts to mitigate climate change, and they damage the trading system. Multilateral discussion is hampered by inconsistent definitions and incomplete data, which could increase the risks of WTO disputes. Members do not notify such subsidies as much as they should under the Agreement on Subsidies and Countervailing Measures (ASCM), which limits the usefulness of the SCM Committee. The reports of the Trade Policy Review Mechanism on individual countries and on the trading system draw on a wider range of sources, creating an opportunity for non-governmental organizations (NGOs) to provide the missing data from publicly available sources. We suggest a new template that could be used for such third-party notifications. The objective is to shine a light on all fossil fuel subsidies that cause market distortions, especially trade distortions. The result should be better, more comparable data for the Secretariat, governments, and researchers, providing the basis for better-informed discussion of the incidence of fossil fuel subsidies and rationale for their use.

It has long been established in theory that uncertainty impacts on firm behaviour. However, the empirical basis for quantifying the uncertainty-reducing effects of trade agreements has not been firmly established. In this paper, we develop estimates of the effect of reducing uncertainty regarding regulation of foreign services markets by making commitments that are bound under a trade agreement. Specifically, we identify the effect on services trade of services trade restrictions, as measured by the OECD's Services Trade Restrictiveness Index (STRI), and the separate effect of ‘water’ in binding commitments, as assessed by the difference between countries’ commitments under the General Agreement on Trade in Services (GATS) or free trade agreements (FTAs) and applied levels of market access, as captured by STRI scores. Using a gravity model, we find that services trade responds positively but inelastically to reductions in services trade barriers, as measured by the STRI and, in our preferred regression, the response to actual restrictions is more than twice – specifically 2.4 times – as strong as the response to comparable reductions in uncertainty, as measured by water. Moving from GATS commitments to FTA commitments leads to a 4.7% increase in services trade because of the reduction in uncertainty.

Throughout the course of the DSU Review, Members and commentators alike have proposed numerous modifications to the WTO DSU covering a wide range of areas. One area which has received quite a bit of attention is that of retaliatory measures in the implementation phase of the dispute settlement process. This article does not attempt to recap the debate over the appropriateness of trade retaliation or even to discuss all potential amendments targeting this issue. It does, however, identify some of the key criticisms of trade retaliation before analyzing and evaluating the worthiness of trade and/or financial compensation as an alternative. The article finds that neither trade nor financial compensation will do much to resolve the prominent criticisms of trade retaliation while also finding both options would add several uncertainties to the system and, far from increasing compliance with the rulings and recommendations of the DSB, could in fact increase the instances of non-compliance.

This paper analyses how trade affects women's job opportunities and earnings through five case studies: Mauritius, Mexico, Peru, the Philippines and Sri Lanka. Women's share of the labour force has increased over time and the wage gap between men and women has narrowed. A positive and statistically significant correlation between exports and women's share of employment is found while there is a statistically significant and negative correlation between women's share in employment and imports. The correlations stem from variation between sectors rather than within sectors over time, indicating that export-competing industries tend to employ women while import-competing industries tend to employ men. Trade liberalization is likely to create jobs for women and over time increase their relative wages.

There is evidence that some countries negotiate trade agreements during economic downturns. Why would a leader do this? We argue that political leaders can gain from such agreements because of the signals they send to their public. The public are less likely to blame leaders for adverse economic conditions when they have implemented sound economic policies, such as signing agreements designed to liberalize trade and prevent a slide into protectionism. In hard economic times, leaders – especially those in democratic environments – may find that trade agreements are a useful way to reassure the public. Since majorities in many countries around the world view trade favorably, leaders may see agreements that prevent them from adopting protectionism as a way to maintain support. We evaluate this argument by analyzing preferential trade agreements (PTAs) formed since 1962. We find that, on average, democratic countries are more likely to form PTAs during hard economic times. We also find that democratic leaders who sign PTAs during downturns enjoy a longer tenure than their counterparts who do not sign such agreements.

In the current multilateral trade regime, members often negotiate under the shadow of WTO law. This article develops a formal explanation of the way in which the credible threat to resort to and the actual use of WTO litigation can influence multilateral trade negotiations. We contend that the ability to impose costs on a defendant by way of litigation increases the complainant's bargaining power, opening a bargaining window and ultimately increasing the chances for cooperation in multilateral trade negotiations. On the other hand, the complainant's preference for loss-mitigation over gains from retaliation and its expectations about the likelihood that the defendant will not comply with an adverse ruling can augment the defendant's bargaining leverage. Thus, contrary to conventional wisdom, increased enforcement does not necessarily make actors shy away from further cooperation, although the credibility of the defendant's non-compliant threats crucially affects the location of any potential negotiated agreement. Empirically, we show that the argument can account for how Brazil, a potential complainant, and the EU and the US, two potential defendants, approached and bargained agricultural negotiations in the Doha Round.

The AB Report in US–Clove Cigarettes confirmed the Panel's conclusions that imported clove cigarettes were ‘like’ US menthol cigarettes, and accorded ‘less favourable treatment’ for the purpose of national treatment under Article 2.1 TBT, but it employed significantly different logic. The AB's reasoning extends earlier GATT jurisprudence into the TBT, applying competition-oriented analysis to the question of product definition, while reserving consideration of regulatory purpose to the comparison of treatment. We consider this emphasis from the perspectives of legal and economic indeterminacy, which we find run in parallel to each other. In the particular questions of the appeal, the AB's decisions are sensible from both perspectives, but ultimately do not add significantly to determinacy. We find it impossible to ignore regulatory purpose in discrimination cases, and we provide a novel economic model for analysing regulatory utility in this respect. In our view, there is not much economic difference in analysing regulatory purpose separately from more observable market considerations, but this sequencing does add political logic, analytical focus and formal transparency, all of which may enhance the legitimacy of WTO dispute settlement rulings, although ideally, further specification from the WTO Membership regarding the methodological content of the national treatment discipline would be preferred.

Small and poor countries pose a challenge for the World Trade Organization (WTO). These countries have acquired a significant say in WTO decision-making. However, they have limited ability to engage in the reciprocity game that is at the heart of the WTO, and have limited interests in the broader liberalization agenda because of their preferential access to industrial country markets. Accommodating the interests of the small and poor countries is desirable in itself, but would also facilitate expeditious progress in the Doha Round. The stark reality facing the system is that the desirable ways of addressing their concerns – providing them additional financial assistance and nonpreferential market access – is proving infeasible. As a result, the system is gravitating toward the less desirable option of relieving these countries of obligations, including those that might be welfare-enhancing for them.

This article examines the relationship between antidumping duties and strategic industrial policy. We argue that the dynamic between the two instruments is more complex and elaborate than that offered by the conventional account. We use the recent China–X-Ray Equipment dispute as a case study to show that linkage between the two instruments may not be the consequence of a government-led policy but instead a result of firm-driven responses to an industrial policy. This in turn may lead to antidumping tit-for-tat behavior between WTO members. We also analyze how WTO litigation serves as a means to alter the payoff and discuss the implications and unresolved questions that remain following the China–X-Ray Equipment ruling by the WTO.