The WTO at 20: an economist’s perspective

• DOI: https://doi.org/10.1108/JITLP-09-2015-0024
• Published date: 21 September 2015
• Pages: 126-128
• Date: 21 September 2015
• Author: Thomas J Prusa
• Subject Matter: Strategy,International business,International business law

The WTO at 20: an economist’s

perspective

Thomas J. Prusa

Department of Economics, Rutgers University, New Brunswick,

New Jersey, USA

Abstract

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

specic disputes and explains how standard microeconomic methods would have produced greater

clarity in the determinations and hence promoted a more efcient 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 fulls an identied 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

errand.

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 benet from using economics to clarify the

legal analysis[1].

The current issue and full text archive of this journal is available on Emerald Insight at:

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JITLP

14,3

126

Journalof International Trade Law

andPolicy

Vol.14 No. 3, 2015

pp.126-128

©Emerald Group Publishing Limited

1477-0024

DOI 10.1108/JITLP-09-2015-0024