the dispute settlement costs must be large enough to offset the potential gains to the defendant government of offering protection. Therefore, when confronted with the trade dispute, the defendant government must
weigh the tradeoffs - the potential costs of the failure to liberalize generated by the dispute settlement
process - against the political and economic costs involved with liberalizing a potentially preferred
sector. These costs are likely to differ across sectors and defendants, thus generating the variation
in liberalizing activity necessary to allow us to estimate the impact of these costs on the economic
success of the dispute settlement process.