Power Plays and Capacity Constraints: The Selection of Defendants in World Trade Organization Disputes

TLDR

WTO dispute selection may be driven by either a power hypothesis—weak states avoid filing against powerful ones—or a capacity hypothesis—low‑income states target high‑income states for higher expected returns. This study investigates how a state's wealth and power influence its participation in WTO dispute resolution. The analysis supports the capacity hypothesis, showing that poorer states target richer ones, while the power hypothesis receives no support, indicating that financial, human, and institutional resources shape dispute participation.

Abstract

This paper examines the relationship between the wealth and power of states and their ability to participate fully within the World Trade Organization's system of dispute resolution. Two alternative hypotheses are considered. The power hypothesis predicts that politically weak countries will refrain from filing complaints against politically powerful states for fear of costly retaliation. The capacity hypothesis predicts that low‐income states will tend to complain about behavior by high‐income states because the latter offer a higher expected return. We test these two hypotheses and find considerable support for the capacity hypothesis and no support for the power hypothesis. We conclude that poor states behave differently than their rich counterparts because they lack the financial, human, and institutional capital to participate fully in the dispute resolution system.