In agreements that include flexibility enhancing mechanisms such as escape clauses, how do institutions realize the benefits of flexibility while preventing its abuse? The conventional wisdom is that escape clauses must be made costly, but I show this claim to be at odds with empirical observation. In the GATT ⁄ WTO, the institution where escape clauses are most prevalent, compensation following escape was only widespread in the 1950s. Since then, it has been progressively abandoned, in favor of appeals to exception. This alternative mechanism relies on an institution's ability to verify the severity and exogeneity of the domestic circumstances of states seeking temporary escape. Relying heavily on GATT archives, I show how early on in the institution, members had made the link between costless escape and increased monitoring, and pursued reforms to achieve both objectives. The success of members' ability to verify escapees' domestic circumstances is observed in the record of safeguard disputes throughout the GATT ⁄ WTO's history. Finally, I use the hypothesized link between verifiable information and the chosen escape mechanism to explain an otherwise puzzling GATT incident, that of French emergency trade measures in 1968.
The treatment of foreign investment has become the most controversial issue in global governance. At the center of the controversy lies the mechanism of investor-state dispute settlement (ISDS), which allows private firms legal recourse against governments if government interference has degraded their investment. Using newly released data covering 742 investment disputes, I assess some of the central claims about ISDS. I argue that the regime has indeed undergone an important shift: a majority of claims today deal not with direct takings by low-rule-of-law countries, but with regulation in democratic states. Such “indirect expropriation” claims have seen a precipitous decrease in their odds of legal success over the past twenty years. They are also far less likely to result in early settlement. These parallel trends may be a result of a rise in strategic litigation by investors whose aim is not only to obtain compensation but also to deter governments' regulatory ambitions.
The concept of precedent is fundamental to domestic courts, especially in Anglo-American common law systems, where judges are bound to the court’s past decisions. By contrast, precedent has no formal authority in international law. Legal scholars point to Article 59 of the International Court of Justice (ICJ) Statute in this respect, according to which international legal rulings are binding only on the parties in the dispute at hand, and have no bearing on matters outside of the case.
Third parties complicate World Trade Organization (WTO) dispute settlement by adding voices and issues to a dispute. However, complainants can limit third parties by filing cases under Article XXIII of the General Agreement on Tariffs and Trade (GATT), rather than Article XXII. We argue that third parties create “insurance” by lowering the benefit of winning and the cost of losing a dispute. We construct a formal model in which third parties make settlement less likely. The weaker the complainant's case, the more likely the complainant is to promote third party participation and to settle. Article XXII cases are therefore more likely to settle, controlling for the realized number of third parties, and a complainant who files under Article XXIII is more likely to win a ruling and less likely to see that ruling appealed by the defendant. We provide empirical support using WTO disputes from 1995 to 2011.
The process by which countries accede to the World Trade Organization~WTO! has become the subject of considerable debate+ This article takes a closer look at what determines the concessions the institution requires of an entrant+ In other words, who gets a good deal, and who does not? I argue that given the institutional design of accession proceedings and the resulting suspension of reciprocity, accession terms are driven by the domestic export interests of existing members+ As a result, relatively greater liberalization will be imposed on those entrants that have more valuable market access to offer upon accession, something that appears to be in opposition to expectations during multilateral trade rounds, where market access functions as a bargaining chit+ The empirical evidence supports these assertions+ Looking at eighteen recent entrants at the six-digit product level, I find that controlling for a host of country-specific variables, as well as the applied protection rates on a given product prior to accession, the more a country has to offer, the more it is required to give+ Moreover, I show how more democratic countries, in spite of their greater overall depth of integration, exhibit greater resistance to adjustment in key industries than do nondemocracies+ Finally, I demonstrate that wealth exhibits a curvilinear effect+ On the one hand, institutionalized norms lead members to exercise observable restraint vis-à-vis the poorest countries+ On the other hand, the richest countries have the greatest bargaining expertise, and thus obtain better terms+ The outcome, as I show using a semi-parametric analysis, is that middle-income countries end up with the most stringent terms, and have to make the greatest relative adjustments to their trade regimes+ The process by which countries accede to the World Trade Organization~WTO! has become the subject of considerable debate+ Critics charge that insufficient deference is given to developing country entrants, 1 that the process is growing ever I thank the editors of IO and two anonymous referees, as well as
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