Why do some international institutions contain strong dispute settlement provisions? New evidence from preferential trade agreements

Abstract

To understand why some international institutions have stronger dispute settlement mechanisms (DSMs) than others, we investigate the dispute settlement provisions of nearly 600 preferential trade agreements (PTAs), which possess several desirable case-selection features and are evoked more than is realized. We broaden the study of dispute settlement design beyond Blegalization^and instead reorient theorizing around a multi-faceted conceptualization of the strength of DSMs. We posit that strong DSMs are first and foremost a rational response to features of agreements that require stronger dispute settlement, such as depth and large memberships. Multivariate empirical tests using a new data set on PTA design confirm these expectations and reveal that depth -the amount of policy change specified in an agreement -is the most powerful and consistent predictor of DSM strength, providing empirical support to a long-posited but controversial conjecture. Yet power also plays a sizeable role, since agreements among asymmetric members are more likely to have strong DSMs due to their mutual appeal, as are those involving the United States. Important regional differences also emerge, as PTAs across the Americas are designed with strong dispute settlement, as are Asian PTAs, which contradicts the conventional wisdom about Asian values and legalization. Our findings demonstrate that rationalism explains much of international institutional design, yet it can be enhanced by also incorporating power-based and regional explanations.

The Domestic Politics of Preferential Trade Agreements in Hard Times

“…More than 80% of PTAs formed from 1947 to 2009 contain some type of dispute settlement provision, with about 6% having a standing legal body (Dür et al , 2014). Although there is substantial variation in the types of DSPs contained in PTAs – from informal negotiations to third-party adjudication – such procedures are frequently used (Rosendorff, 2015; Allee and Elsig, 2016). A recent study places the number of PTA-related disputes in the Western Hemisphere in the thousands since 1995 (Laks-Hutnick, 2013, as cited in Allee and Elsig, 2016: 100).…”

“…Although there is substantial variation in the types of DSPs contained in PTAs – from informal negotiations to third-party adjudication – such procedures are frequently used (Rosendorff, 2015; Allee and Elsig, 2016). A recent study places the number of PTA-related disputes in the Western Hemisphere in the thousands since 1995 (Laks-Hutnick, 2013, as cited in Allee and Elsig, 2016: 100). The North American Free Trade Agreement (NAFTA) alone has at least seven forms of dispute settlement for topics ranging from anti-dumping and countervailing duties to environmental and labor cooperation (de Mestral, 2006: 4).…”

East Asia, Investment, and International Law: Distinctive or Convergent?

“…32 I argue that robust growth and weaker investor protections -rather than cultural preferences -at least partially explain the lack of litigation involving states and firms in this region. East Asian states responded to the 1997 crisis largely by further liberalizing and to some extent harmonizing their nation- 32 Recent research suggests that investor protections offered in Asian trade agreements are just as if not stronger than elsewhere in the world (Allee and Elsig 2014). Regional changes are likely driven to a significant degree by changes in China's preferences for better investment protections, including national treatment (Shan, Gallagher and Zhang 2012).…”

EU Aid for Trade: Mitigating Global Trade Injustices?

“…According to Wilkinson (2017) the current weakening of trade multilateralism is affecting developing countries the most. Many scholars argue that in PTA negotiations 'traditional' factors like market size and asymmetric bargaining power matter more than in the multilateral setting (Allee and Elsig 2016;Meunier and Nicolaidis 2006;Hurt et al 2013). In the words of Wilkinson (2017) the stalemate in the WTO 'better enables the industrialized states to regain control of a trade agenda'.…”