The WTO at 20: an economist’s
Thomas J. Prusa
Department of Economics, Rutgers University, New Brunswick,
New Jersey, USA
Purpose – This paper aims to clarify the role that economic methodology and approach can help the
World Trade Organization (WTO) Appellate Body (AB)make better decisions. The author discusses
two prominent disputes to demonstrate how economics could have resulted in improved AB decision.
First, there is the question of whether countervailing duties can continue to be imposed subsequent to
privatization of state-owned enterprises. Second, there is the frequently challenged zeroing issue.
Design/methodology/approach – The author uses a case study method. He reviews the details of
specic disputes and explains how standard microeconomic methods would have produced greater
clarity in the determinations and hence promoted a more efcient dispute resolution process.
Findings – In this commentary, however, the author addresses a frustration with the AB, namely, the
reluctance of the AB to embrace economics in its decision-making. He argues that economic methods
would produce superior determinations.
Originality/value – This paper fulls an identied need to document how economic methods would
have led to better AB decisions.
Keywords Economics, Appellate body, WTO dispute settlement understanding
Paper type Viewpoint
One of the Uruguay Round’s most notable achievements was the establishment of the
World Trade Organization (WTO) Dispute Settlement Understanding (DSU). In this
commentary, however, I address a frustration with the Appellate Body (AB), namely,
the reluctance of the AB to embrace economics in its decision-making. On the one hand,
the reluctance is understandable. The WTO Agreements are legal documents and many
of the disputes AB involve legal interpretation of statutes and provisions. Typically, AB
members are trained as lawyers. In fact, to my knowledge, no AB member has been
formally trained as an economist (PhD). Relying on legal analysis is the AB’s “comfort”
zone. Moreover, to many non-economists, economic theories are obtuse, often arbitrary,
and overly theoretical. Some of these criticisms are valid. A lot of advanced economic
theory is highly abstract. Applying such theories to WTO disputes would be a fool’s
On the other hand, many disputes involve clear economic issues such as causality,
injury and retaliation rights. It is my view that in these areas (and more), standard
economic and statistical theory would dramatically clarify what is really happening in
the market and facilitate the impact of the allegedly inconsistent policies. I am not
arguing that economic theory should displace legal analysis and interpretation but
rather that the AB’s decisions would often benet from using economics to clarify the
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Journalof International Trade Law
Vol.14 No. 3, 2015
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