International institutions and market expectations: Stock price responses to the WTO ruling on the 2002 U.S. steel tariffs

Many scholars assert that international institutions have little power to enforce laws, punish offenders, or force compliance. Others stress that international institutions are important actors, specifically in the regulation of international trade. In this paper, I show that the recent trade dispute over U.S. steel protection provides us with a critical case to evaluate the role of the World Trade Organization in settling trade disputes and specifically stabilizing expectations of market actors over future steel policy. I argue that stock prices can serve as an important tool in answering these questions. In an empirical analysis using daily steel stock prices, I find that during the 2002 WTO steel case, the WTO dispute mechanism helped market actors stabilize expectations of future trade policy.

Nathan M. JensenEmail: