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Tying Hands without a Rope: Rational Domestic Response to International Institutional Constraints
... Hence the probability density function is (Prusa 1997). The complainant also can in effect impose the transaction costs of GATT litigation on the defendant, which can be considerable (Reinhardt 2002), including (even for the richest states) scarce staff time that could have been spent preparing other GATT disputes and direct legal outlays by the government and involved firms. In addition, an adverse GATT ruling, even if it cannot be enforced, may spoil the defendant government's pretensions to compliance with the GATT regime or, more concretely, damage its prospects in complaints of its own. ...
... First, it enriches our understanding of the domestic politics of trade disputes. In fact, most models of GATT dispute settlement ignore domestic politics altogether (e.g., Kovenock and Thursby 1992;Maggi 1999;Ludema 2001;Reinhardt 2001; but see Reinhardt 2002). The model here takes up the call issued a decade ago by Feenstra and Lewis (1991, 305) for a formal analysis of GATT negotiations with probabilistic domestic defection built in. ...
... For a formal model and empirical evidence delineating these conditions, seeReinhardt (2002), which argues that reasonably high litigation costs and a nontrivial probability of foreign retaliation are necessary to enable a leader to tie his protectionist domestic group's hands and liberalize under threat of a GATT ruling. ...
Draft book manuscript, July 30, 2003
... 26 Kahler 2000; see also Dai 2007. 27 Allee and Huth 2006;Reinhardt 2003. The most developed discussion of this -lock-in‖ effect is offered by Moravcsik (2000) in the context of the European Court of Human Rights. ...
... Other scholars have noted that leaders conducting trade policy in the shadow of the more legalized WTO are better able to resist domestic pressure for protection. This is true because they are able to argue plausibly that their hands are tied to respect international rules and to comply with panel rulings when such rules have been violated (Reinhardt 2003;Finger & Winters 1998: 366). As Hudec (1992: 28) points out, the WTO's appeals process adds yet another layer of legal responsibility, allowing leaders to argue to domestic interests that they are -doubly bound‖ to resist protectionism. ...
The international relations literature typically assumes that powerful states are the most reluctant to delegate substantial authority to international organizations (IOs) because they have the most to lose. And yet one of the most dramatic instances of delegation, the establishment of a more legalized dispute settlement mechanism during the GATT/WTO Uruguay Round, was spearheaded by the United States. Existing work on delegation and legalization fails to account for this outcome because it tends to overlook the domestic political reasons for why governments transfer authority to the international level. In comparison to other domestic actors, I argue, executives benefit disproportionately when issues are managed through IOs since they act as the state's representative at the international level and have more influence over IO affairs. As a result, delegation strengthens the hand of the executive relative to legislatures and special interest groups. This paper illustrates these points by showing how domestic political conflict between the U.S. President and Congress helps explain the nature and timing of dispute settlement legalization during the Uruguay Round.
... At the outset of a case, for example, the tight enforcement of newly standardized terms of reference, legal disincentives for disclosure and the rules on standing, all serve to place the onus on disputants and third parties to legally mobilize as soon as possible to avoid losses on technicalities (i.e., having the panel or AB deem a certain argument outside its terms of reference) later on. After a ruling, the prospect of an Article 21.5 " compliance " panel review (and possibly appeal) and Article 22 " arbitration " panel increases the incentives for foot-dragging, and may thus motivate errant defendants to delay making concessions (Shoyer 1998; Reinhardt 2002). For developing countries, in particular, this bodes poorly for settling early. ...
... Using a measure that has meaning at each stage of dispute settlement, from consultations to a decision by the AB, we code outcomes according to whether substantial, partial, or no concessions were made with regard to the contested trade measure(s). While such an approach has been used to study GATT disputes (Hudec 1993; Busch 2000; Reinhardt 2001 Reinhardt , 2002), this paper is one of the first to systematically characterize WTO outcomes in this way (but see Busch and Reinhardt forthcoming). By way of illustration, Hormones (DS26) scores as no concessions, and Duties on Imports of Grains (DS13) ended with full concessions . ...
Introduction It has long been observed that developing countries made scant use of dispute settlement under the General Agreement on Tariffs and Trade (GATT). Less clear are the reasons for this limited usage. Most observers insist that the various GATT reforms designed to help developing countries failed to insulate them from the “power politics” of the system (Kuruvila 1997). Not surprisingly, many of these same observers predict that the greater “legalism” of the World Trade Organization (WTO) and of the Dispute Settlement Understanding (DSU) in particular will encourage more participation by developing countries. Indeed, some go so far as to suggest that, enticed by a system in which, unlike in the GATT years, “right perseveres over might” (Lacarte-Muro and Gappah 2000, 401), developing countries will have greater recourse to multilateral dispute settlement. The underlying presumption, of course, is that developing countries were especially ill served by GATT's diplomacy and are better poised to benefit from the WTO's more legalistic architecture. We argue that this conventional wisdom is wrong on both counts. In assessing how developing countries have fared in dispute settlement, two questions beg empirical attention. First, have developing countries secured more concessions, by which we mean favorable trade policy outcomes, in WTO versus GATT dispute settlement? And second, what explains any differences in the outcomes realized by developing as opposed to developed countries? As a first cut, most observers note that developing countries have, in fact, been more active in WTO dispute settlement.
... sovereignty) by adopting new international economic or human rights obligations (e.g. Downs, Rocke and Barsoom, 1996; Moravcsik, 2003; Simmons, 2000; Reinhardt, 2002; Mansfield and Pevehouse, 2006)? The second question becomes: What accounts for subsequent compliance with these obligations (e.g. ...
... The reason is that common theoretical explanations in international relations for the adoption of, and subsequent compliance with, international obligations do not explain well observed behavior in the human rights context. On one popular account, governments adopt international obligations in order to bind successors to normatively appealing policies (Moravcsik, 2003; Reinhardt, 2002). By " locking-in" preferred norms, treaties serve as a sort of insurance policy against future losses of power. ...
The grip of Realism on the study of international politics has been considerably loosened over the past three decades, but one of the central assumptions of Realism remains unchallenged by scholars working within other approaches: the primary distinction between domestic and international politics lies in a sharp distinction between legal institutions. We propose that there is much to be learned by challenging this assumption. More specifically, we argue that the presumed difference between domestic and international legal institutions has been severely overdrawn. An examination of the institutional literature on judicial politics reveals that this literature problematizes what IR scholars take for granted in domestic politics: delegation of authority to legal institutions, adverse rulings by those institutions, and government compliance with such rulings. Rather than assume that these processes simply work in the domestic setting, this scholarship demonstrates that it must be explained. Seen from this perspective, the distinction between the study of domestic and international legal institutions falls away, revealing that scholars interested in either arena are really working in a larger literature. To make this claim we review the existing work in the judicial politics and the international human rights literatures pointing out areas of overlap, distinction, and opportunities for cross-fertilization.
... A solution to this soft-budget constraint problem is ex ante commitment of the government not to intervene, which is a rationale for the European state aid control. In such a case, benevolent governments are happy to collectively limit their freedom in state aid policy (Reinhard, 2002). Depending on particular details of the market failure, other ways to reduce soft-budget constraints suggested in the literature include decentralization of decision making (Dewatripont and Maskin, 1995), privatization (Shleifer and Vishny, 1994;Boycko et al., 1996) and separation of social good from private goods provision (Röller and Zhang, 2005). ...
Die Regierungen in der Europäischen Union retten Unternehmen in Schwierigkeiten durch staatliche Rettungs- und Umstrukturierungsbeihilfen. Diese Dissertation besteht aus drei Kapiteln, die solche Beihilfen analysieren. Im ersten Kapitel nutze ich Daten von 86 Fällen aus den Jahren 1995-2003 um zu prüfen, wie wirksam die Beihilfen bei der Konkursprävention sind. Es gibt drei Ergebnisse. Erstens steigt die geschätzte diskrete hazard rate in den ersten vier Jahren nach der Subvention und sinkt danach, was nahelegt, dass einige Sanierungen den Konkurs eher verzögern als verhindern. Zweitens, Regierungen favorisieren staatliche Unternehmen bei Beihilfeentscheidungen, obwohl diese keine besseren Überlebenschancen haben. Drittens, die Wahl, ob Rettungs- oder Umstrukturierungsbeihilfe gewärt wird, ist eine endogene Variable in der Analyse. Wenn man sie als exogen betrachtet, unterschätzt man die Auswirkungen auf die Konkurswahrscheinlichkeit. Das zweite Kapitel ist eine Studie über die Auswirkungen von Bailouts auf Marktstruktur und Wohlfahrt in einem internationalen, asymmetrischen Cournot -- Duopol. Es wird gezeigt, dass die optimale Beihilfe positiv ist, auch wenn der Marktaustritt einer Firma nicht verhindert werden kann. Der Grund hierfür ist ein strategischer Effekt, der die effizientere Firma zu einer zusätzlichen kostenreduzierenden Maßnahme veranlasst. Wird der Marktaustritt verhindert, ist Effizienz geringer. Das dritte Kapitel enthält empirische Belege der politischen, institutionellen und wirtschaftlichen Determinanten der Sanierungsubventionspolitik. Ich nutze einen neuen Datensatz über Entscheidungen über Rettungs- und Umstrukturierungsbeihilfen während der Jahre 1995-2003 zusammen mit Informationen über Wahlergebnisse in den Europäischen Ländern. Das wichtigste Ergebnis ist, dass die Beihilfen in Ländern mit Mehrheitswahlsystem wahrscheinlicher sind, insbesondere während der Jahre vor Wahlen.
... Howse 2000.28 Shoyer 1998;Reinhardt 2002. ...
... This perspective yields some additional hypotheses. In particular, even under the WTO, most less developed countries (LDCs) remain unable to mount WTO legal complaints, 46 which are by necessity extraordinarily complex. Given the accompanying 26,000 pages of new law, 47 the WTO has nominally increased technical assistance but in practice rules out such aid to all members who fail to pay dues, i.e., precisely those states who need it the most. ...
Abstract Why do states initiate trade disputes under the General Agreement on Tariffs and Trade (GATT) or its successor, the World Trade Organization (WTO)? Existing studies suggest that democracies,should either experience fewer trade conflicts or at least resolve them more cooperatively. Other works contend that the filing of complaints itself constitutes proof of the efficacy of the trade dispute settlement regime, and that changes in that regime account for the rising number,of trade complaints in recent years. This paper provides the first large-scale test of these hypotheses and others, using multivariate regression and exhaustive new data on dispute initiation within all GATT/WTO directed dyads from 1948 through 1998. The evidence contradicts prevailing explanations. It turns out that democracies experience more trade conflict, not less, and they resolve their disputes less cooperatively as well. Moreover, changes in the dispute settlement regime have had little impact. 1 “Whoever speaks of dispute settlement in GATT must start from nearly nothing.”
... Hudec (1993) compiled data on all GATT disputes initiated from 1948 to 1989, including measures of each dispute's outcome. This data series is updated to 1993 by Reinhardt (1999). To each dispute, Hudec and Reinhardt assign an ordinal assessment of the dispute's outcome: 1, 2, or 3 if the policy change demanded by the state initiating the dispute was not implemented (1), partially implemented (2), or fully implemented (3). ...
Rawlsian fairness is motivated by two devices: the veil of ignorance that separates individuals from knowledge of their ultimate positions in society and the necessity of irrevocable consent. After making constitutional choices, individuals must live with the consequences of the distributive principles they have chosen; they cannot withdraw from society. Yet, in many problems of institutional choice, people can withdraw from cooperative arrangements after the allocation of benefits has been made. The relationship between fairness and stability in general problems of institutional choice is examined. In symmetric problems, fairness maximizes the stability of institutions. When one individual has a higher valued outside option, maximizing institutional stability requires assigning to that individual a correspondingly large share of the benefits of cooperation. An individual for whom the benefits of cooperation are more prone to risk must generally receive a larger share of the benefits of cooperation if institutional stability is to be maximized.
... The value of such normative condemnation should not be underestimated. It may, for instance, empower liberalizing forces within the target country in a way not possible with direct pressure by the US (Reinhardt 1999). 3 But, even assuming most targets, most of the time, care little about compliance for its own sake, US uncertainty about the potential impact of normative condemnation of the target can actually condition the behavior of any target state. ...
... See Downs and Jones 2002;Press 2005. 49 Stiglitz 2002, p. 227;Jordan and Majnoni 2002;Reinhardt 2003;Drezner 2007a, chapter five. 50 Some governments outsource their legal needs to western law firms well-versed in international law. ...
for their feedback. The German Marshall Fund of the United States provided generous funding during the drafting of this paper. The usual caveat applies. 2 ABSTRACT In recent years there has been a proliferation of international rules, laws and institutional forms in world politics. This has triggered attention to the role that forum-shopping, nested and overlapping institutions, and regime complexes play in shaping the patterns of global governance. A few policymakers, some international relations scholars, and many international law scholars posit that this trend will lead to a more rule-based world in world politics. This paper suggests a contrary position: institutional thickness has a paradoxical effect on global governance. After a certain point, proliferation shifts global governance structures from rule-based outcomes to power-based outcomes – because proliferation can enhance the ability of great powers to engage in forum-shopping.
... 35 Aggarwal 2005; Alter and Meunier 2006. 36 Stiglitz 2002, p. 227; Jordan and Majnoni 2002; Reinhardt 2003; Drezner 2007a, chapter five. head. ...
for their feedback. The German Marshall Fund of the United States provided generous funding during the drafting of this paper. The usual caveat applies. 2 ABSTRACT In recent years there has been a proliferation of international institutions, as well as renewed attention to the role that forum-shopping, nested and overlapping institutions, and regime complexes play in shaping the patterns of global governance. This paper argues that at present, institutional proliferation has a paradoxical effect on global governance. Proliferation shifts global governance structures from rule-based outcomes to power-based outcomes – because proliferation enhances the ability of the great powers to engage in forum-shopping. This leads to another question – under what conditions will great power governments be constrained from forum-shopping? Most of these factors suggested in the international regimes literature do not pose either a consistent or persistent constraint to forum-shopping. After examining one example of where forum-shopping was temporarily constrained – the 2001 Doha Declaration on intellectual property rights and public health – this paper suggests that issue linkage and organizational reputation can increase the viscosity of global governance in the short run. The barriers to forum-shopping are not constant over time, however; in the long run, there is little viscosity in global governance structures.
... Other scholars have noted that leaders conducting trade policy in the shadow of the more legalized WTO are better able to resist domestic pressure for protection. This is true because they are able to argue plausibly that their hands are tied to respect international rules and to comply with panel rulings when such rules have been violated (Reinhardt 2003;Finger & Winters 1998: 366). As Hudec (1992: 28) points out, the WTO's appeals process adds yet another layer of legal responsibility, allowing leaders to argue to domestic interests that they are-doubly bound‖ to resist protectionism. ...
The international relations literature typically assumes that powerful states are the most reluctant to delegate substantial authority to international organizations (IOs) because they have the most to lose. And yet one of the most dramatic instances of delegation, the establishment of a more legalized dispute settlement mechanism during the GATT/WTO Uruguay Round, was spearheaded by the United States. Existing work on delegation and legalization fails to account for this outcome because it tends to overlook the domestic political reasons for why governments transfer authority to the international level. In comparison to other domestic actors, I argue, executives benefit disproportionately when issues are managed through IOs since they act as the state's representative at the international level and have more influence over IO affairs. As a result, delegation strengthens the hand of the executive relative to legislatures and special interest groups. This paper illustrates these points by showing how domestic political conflict between the U.S. President and Congress helps explain the nature and timing of dispute settlement legalization during the Uruguay Round.
... 50 Aggarwal 2005; Alter and Meunier 2006. 51 Stiglitz 2002, p. 227; Jordan and Majnoni 2002; Reinhardt 2003; Drezner 2007a, chapter five. 52 Chayes and Chayes 1995 ...
In recent years there has been a proliferation of international rules, laws and institutional forms in world politics. These trends have renewed attention to the role that forum-shopping and regime complexity play in shaping the patterns of global governance. A few policymakers, some international relations scholars, and many international law scholars posit that institutional proliferation will lead to a more rule-based world in world politics. This paper suggests a contrary position: institutional thickness has a paradoxical effect on global governance. After a certain point, proliferation shifts global governance structures from rule-based outcomes to power-based outcomes – because institutional proliferation erodes the causal mechanisms through which regimes ostensibly strengthen international cooperation. To demonstrate these effects, the paper examines two cases: the aftermath of the 2001 Doha Declaration on intellectual property rights and public health, and recent efforts to create an WMD interdiction regime that permits the boarding of ships on the high seas. These cases show that global governance structures possess little "viscosity".
... The value of such normative condemnation should not be underestimated. It may, for instance, empower liberalizing forces within the target country in a way not possible with direct pressure by the US (Reinhardt 1999). 3 But, even assuming most targets, most of the time, care little about compliance for its own sake, US uncertainty about the potential impact of normative condemnation of the target can actually condition the behavior of any target state. ...
... Indeed, in a way that few have recognized, the mere fact that powerful defendants can no longer significantly delay or block the Panel establishment itself means that legal preparation carries more weight in pre-Panel bargaining. Moreover, after a ruling, the prospect of an Article 21.5 " compliance " Panel review (and possibly appeal) and Article 22 " arbitration " of the suspension of concessions greatly increases the incentives for foot-dragging, motivating errant defendants to delay making concessions (Shoyer, 1998; Reinhardt, 2002). The new premium on legal capacity under the DSU is likely less burdensome for most of the advanced industrial states, which generally maintain large, dedicated, permanent legal and economic staffs tasked with WTO and trade law matters. ...
... Accessed at http://www.slate.com/id/2153352/. 46 Stiglitz 2002, p. 227;Jordan and Majnoni 2002;Reinhardt 2003;Drezner 2007a, chapter five. 47 Some governments outsource their legal needs to western law firms well-versed in international law. ...
for their feedback. The German Marshall Fund of the United States provided generous funding during the drafting of this paper. The usual caveat applies. 2 ABSTRACT In recent years there has been a proliferation of international institutions, as well as renewed attention to the role that forum-shopping, nested and overlapping institutions, and regime complexes play in shaping the patterns of global governance. A few policymakers, some international relations scholars, and many international law scholars posit that this trend will lead to a more rule-based world in world politics. This paper takes a contrary position: institutional proliferation has a paradoxical effect on global governance. Proliferation shifts global governance structures from rule-based outcomes to power-based outcomes – because proliferation enhances the ability of the great powers to engage in forum-shopping. This leads to another question – under what conditions will great power governments be constrained from forum-shopping? Most of these factors suggested in the international regimes literature do not pose either a consistent or persistent constraint to forum-shopping. The paper then examines a case that represents a "tough test" for the proposed argument: the 2001 Doha Declaration on intellectual property rights and public health, and its aftermath. This is a case where forum-shopping was temporarily constrained. I argue that issue linkage and organizational reputation can temporarily increase the viscosity of global governance. The barriers to forum-shopping are not constant over time, however; in the long run, there is little viscosity in global governance structures.
... Negotiating the myriad global governance structures and treaties requires considerable amounts of legal training and technical expertise related to the issue area at hand. Although these transaction costs might seem trivial to great powers with large bureaucracies, specialized human capital is a relatively scarce resource in much of the developing world (Stiglitz 2002: 227;Jordan and Majnoni 2002;Reinhardt 2003;Drezner 2007a: chapter five). 11 This is particularly true when dealing with regime complexes that contain potentially inconsistent elements. ...
The increasing density of international regimes has contributed to the proliferation of overlap across agreements, conflicts among international obligations, and confusion regarding what international and bilateral obligations cover an issue. This symposium examines the consequences of the complex of overlapping, parallel and nested agreements for subsequent politics, thus the issue of overlap and complexity as an independent variable. Our central questions are: What insights can be gained by thinking about any single agreement as part of a larger complex of international rules and agreements? Does the existence of simultaneous and overlapping agreements alter either the strategies of players or the politics of the issue itself? Karen Alter and Sophie Meunier's introductory essay identifies the mechanisms through which nesting and overlap across agreements can influence politics, and identifies six modes through which overlap as an independent variable can manifest itself. Short contributions identify how the complex of international agreements affects politics in specific issue areas: refugee politics (by Alexander Betts), trade politics (by Christina Davis), human rights and trade (by Emilie Hafner-Burton), intellectual property politics (by Laurence Helfer), security politics (by Stephanie Hofmann), and election monitoring (by Judith Kelley). Daniel Drezner concludes by arguing that the complexity of rules may well benefit the powerful more than others.
... This may increase the perception of other actors that these governments are committed to a regional integration effort and perhaps make actors more likely to make long-term investments (Farber 2002). Governments also frequently use judgments by international courts to explain to their domestic publics why they have to maintain an unpopular policy (Reinhardt 2002), thus potentially alleviating fears that cooperation will stop due to domestic opposition. Moreover, delegation to regional courts may alleviate concerns among smaller states that they will be subjected to powerbased inequalities in the implementation of regional agreements. ...
Why is Asia lagging behind other regions in creating regional judicial institutions? What lessons from the operation of such institutions elsewhere could be valuable to Asian regional economic integration? I show that Asian states are not unusually averse to refer inter-state disputes over trade, investment, and territory to global judicial institutions. Moreover, Asian states are not unique in their reluctance to resolve regional inter-state disputes through judicial means: Regional judicial institutions elsewhere have also rarely been used to resolve inter-state disputes. The most valuable lesson for Asia from experiences elsewhere is the role that regional courts can play in resolving disputes between administrative agencies and private parties about the implementation of international law. I suggest various ways in which these lessons can be applied.
... There is broad consensus over the fact that one of the chief reasons for countries' joining preferential trade agreements (PTAs) and multilateral trade agreements such as the WTO is as a means of dealing with domestic pressure for protection, which state leaders know to be socially inefficient (Goldstein, Rivers and Tomz 2007; Reinhardt 2001). Executives have a long-term interest in abating barriers to trade across the board, yet they may face periodic domestic pressure to reinstate targeted trade barriers in order to protect powerful interest groups. ...
... All these practices not only introduce 'constructive peer pressure' (Dion, 2005) but also provide a 'window of opportunity' for ministers and political élites to skirt round domestic reactions and take the appropriate legal measures. In this two-level game, European and national-reformist leaders often use the device of 'blame-shifting' or 'tying the hands' in order to overcome national oppositions (Reinhardt, 2002). ...
Greece, an EU‐member state since 1981, lagged behind other European countries in the development of a national quality assurance system. This article charts the route to the establishment of a quality assurance system in Greece. While national evaluation and accreditation systems were established in most European countries during the mid‐1980s and 1990s, any attempt of assessing the quality of education and research or other services provided by Greek higher education institutions and of rendering social accountability for the public resources that they received, was considered a threat to their autonomy. Moreover, while Greece was a signatory state of the Bologna Declaration, the Bologna Process has been ‘demonised’ and the commitments concerning quality assurance remained a dead letter. However, it was the Bologna Process that led to the national quality assurance system being established by law in 2005, close to the Bergen Ministerial Conference. The stocktaking exercise played a key role in this development not only in the case of Greece but also for some other South East European countries.
International climate finance is a crucial component of the response to climate change. This paper examines how national-level funding vehicles mobilize finance from international sources. Based on interviews with policymakers and various actors involved in the negotiation and design of four major early national climate funds, the Amazon Fund, the Bangladesh Climate Change Resilience Fund, Ethiopia’s Climate Resilient Green Economy Facility, and the Indonesia Climate Change Trust Fund, this paper identifies design features of national climate funds and highlights the trade-offs that developing countries face in their pursuit of climate finance. These design features have significant bearing on the overall effectiveness of the funds themselves. The findings from this study suggest that developing countries seek to maximize control over the funds even though it means that the design features do not minimize costs, as efficiency-oriented perspectives would suggest. The experience of these early national climate funds could be instructive to those governments and stakeholders considering establishing their own national climate funds or improving features. Three policy lessons are noteworthy: the importance of demonstrating commitment to climate policy through transparent data and results, instilling robust fiduciary standards and safeguards, and the virtuous cycle mobilizing climate finance and acquiring a track record on climate programming.
International experts from law, economics and political science provide in-depth analysis of international trade issues. Attorneys, economists and political scientists adopt a common viewpoint, entitled 'transcending the ostensible'. This approach directs particular attention to the possibility that WTO legal institutions, like other international legal institutions, will function in unexpected ways due to the political and economic conditions of the international environment in which they have been created, and in which they operate. A range of trade problems are considered here. Topics include the constitutional dimensions of international trade law, adding subjects and restructuring existing subjects to international trade law, the legal relations between developed and developing countries, and the operation of the WTO dispute settlement procedure. This will be an essential volume for professionals and academics involved with international trade policy.
International experts from law, economics and political science provide in-depth analysis of international trade issues. Attorneys, economists and political scientists adopt a common viewpoint, entitled 'transcending the ostensible'. This approach directs particular attention to the possibility that WTO legal institutions, like other international legal institutions, will function in unexpected ways due to the political and economic conditions of the international environment in which they have been created, and in which they operate. A range of trade problems are considered here. Topics include the constitutional dimensions of international trade law, adding subjects and restructuring existing subjects to international trade law, the legal relations between developed and developing countries, and the operation of the WTO dispute settlement procedure. This will be an essential volume for professionals and academics involved with international trade policy.
In a significant milestone in the international campaign to secure accountability for the crimes against the Rohingya, the International Court of Justice ('ICJ') ordered provisional measures, pending a final determination on the merits, requiring Myanmar to observe its obligations under the Genocide Convention and to report periodically on its progress. One striking aspect of the case was the identity of the applicant: The Gambia, a geopolitically remote state to the events in question that itself brought the case as part of the Organization of Islamic Cooperation's campaign to secure accountability in Myanmar. The Gambia v Myanmar marks the first occasion in which the ICJ has been used as a forum for 'strategic litigation', a method of advocacy that uses the courts in an attempt to effectuate wider systemic change. Through the lens of The Gambia v Myanmar, this article evaluates the scope for actors to use the strategic litigation instrument to secure accountability for atrocity crimes and the extent to which the ICJ is able to fill gaps within the regulatory regime of international justice in the UN system.
How do countries settle disputes in the shadow of the law? Even in the presence of legalized dispute settlement, countries still rely on diplomatic channels to resolve conflicts. But it can be difficult to assess diplomacy’s impact on dispute resolution because those channels tend to be opaque. We present both an original theory of the impact of diplomacy on dispute resolution and a novel measure of diplomacy. If countries with close or, conversely, distant relationships use legal channels for dispute resolution, diplomacy will have little impact on dispute settlement; resorting to legal recourse among friends or adversaries likely means that the dispute is intractable. However, diplomacy can increase the chances of settlement between countries with moderate levels of affinity. We test this argument using a protocol-based proxy for diplomatic interactions—gifts given at the occasion of meetings between diplomatic counterparts—that would otherwise be difficult to observe. Using the case of the United States and its disputes in the World Trade Organization, we find support for our argument. This suggests that even when countries resort to legalized methods of dispute settlement, bilateral dealmaking still plays an important role.
How and to what extent internationalization affects domestic politics is one of the most important and debated perennial questions in international political economy. This doctoral thesis takes a particular angle at this question by studying the influence of the World Trade Organization (WTO), its substantial rules and its dispute settlement mechanism, on European Union (EU) decision-making processes on health, environmental and consumer regulation.
Starting with refuting the widely but mistakenly held assumption that WTO-rules and dispute rulings have direct effect, the main research question in this thesis is how, why and with what effect the WTO affects regulatory politics within the EU. Theoretically, the predominant rational functionalist perspective on the domestic influence of the WTO that argues that exporters as ‘victims of non-compliance’ through retaliation will play the role of WTO-advocates during decision-making processes on regulation is challenged. Also realism and state-centric constructivism are judged less than satisfactory theories to understand the actual influence of WTO-rules on regulatory politics. A more sophisticated perspective based on a critical reading of historical institutionalism is put forward as a more plausible alternative. This perspective conceptualizes WTO-rules as part of a strategically selective context and emphasizes strategic action within the compartmentalized EU policy system by (coalitions of) public and private actors. It draws attention to the importance of the interpenetrative and interactive relationship between EU internal regulatory politics and international trade (rules) to understand contemporary regulatory decision-making processes.
The empirical analysis is carried out through the process-tracing of three decision-making processes on regulation with (potential) significant external trade effects. The first case, the EU’s trade ban in seal products, demonstrates the inadequacy of the rational functionalist logic by not fitting its expectations in a very-likely case. While this EU regulation did not serve any rent-seeking import-competing interests, and although predictably negatively affecting the EU trade relationship with Canada and eventually provoking a WTO-dispute, exporters have not lobbied against the regulation and the most trade-restrictive alternative has been adopted. In contrast to the first case, in the other two case studies – REACH and the carbon border tax in the context of the EU climate and energy package – the decision-making process has resulted in, respectively, a less- and non-trade-restrictive outcome. WTO-consistency has been an important consideration in these processes. Once more against rational functionalist expectations, it have not been exporters that have advocated WTO-consistent adjustment/adoption of the proposed regulations, but European associations from the regulated sectors, along with EU policy-makers responsible for trade and industry. It is argued in the dissertation that this has several sources. These European associations are dominated by transnational enterprises that fear loss of profits within the EU, but especially on third markets, from stringent regulation. They therefore use WTO-consistency strategically as an argument in advocating less stringent and trade-restrictive regulation. They thereby find allies in trade policy decision-making actors, with whom they have traditional ties and that have incentives to avoid trade disputes and are ideationally dedicated towards WTO-consistency. Finally, the avoidance of burdensome EU regulations is also increasingly commensurate with, or even necessitated by, the new growth strategy of the Union that is premised more and more on exports towards emerging economies.
The main conclusion is that ‘the shadow of the WTO’ does not influence domestic regulatory processes within the EU primarily through its dispute settlement mechanism via the mobilization of exporters that fear retaliation. It has an influence on internal regulatory politics mainly by empowering stringent-regulation-averse firms and promoting the involvement of trade policy-makers in decision-making processes. Especially in conjunction with a competitiveness discourse and rhetoric may WTO-rules then lead to less stringent and trade-restrictive and thus more WTO-consistent regulation. If one main conclusion from this dissertation should be put forward it would be the inherently contingent statement that the domestic influence of the WTO is what domestic actors make of it. The thesis reveals some other interesting conclusions about the intersection of EU internal regulation and internationalization that will be discussed in the concluding chapter and are proposed as fruitful areas for further research.
The record of formal disputes in the General Agreement on Tariffs and Trade (GATT) is largely one of conflict among democracies. I develop a theoretical argument to explain the prevalence of democratic states in the GATT's dispute process. Democracies face stronger pressures to initiate disputes; they are more attractive as dispute targets due to the political influence enjoyed by interest groups; they share norms of juridical dispute resolution; and they are more likely to uphold their policy commitments than nondemocracies. I develop an empirical model of the incidence of disputes among GATT members, finding that democracies are more likely to participate in disputes than nondemocratic states. I also find that democratic dyads are more likely to resolve their disputes cooperatively.
This study seeks to analyze Brazil's foreign trade policy, which is of growing importance and complexity, in the particular case of litigation with the WTO's Dispute Settlement Body. Such policy centralization with the Executive Branch is examined with focus on the decision making processes, with grounds on the political and economical context relevant to the selection of disputes to be initiated with the mentioned dispute settlement mechanism. Brazilian Chamber of Foreign Commerce (Camex)'s operations are scrutinized, as well as its interactions with other state bodies, which is followed by an investigation of the dynamics of the disputes' conduction and their repercussion on the WTO's trade agenda. Perceived results are that, despite decisions in respect to the litigation with the WTO's Dispute Settlement Body being centralized with Camex, dispute settlement decisions correspond to the country's trade mix and strategic international negotiation positions, and are closely connected to the Brazilian exports and major trade partners. Shaped by internal and external constraints, therefore, the strategies related to international trade disputes require enhanced transparency and cooperation with the private sector.
O presente estudo busca analisar a formulação da política comercial brasileira, de relevância e complexidade crescentes, no caso das demandas brasileiras ao Órgão de Solução de Controvérsias (OSC) da Organização Mundial do Comércio (OMC). Examina-se a centralização de tal política no Poder Executivo com foco em seus processos decisórios, a partir do contexto econômico e político pertinente para a seleção das demandas apresentadas a tal mecanismo de solução de controvérsias. Além de se perscrutar o funcionamento da Câmara de Comércio Exterior (Camex) e sua interação com outros órgãos estatais, investiga-se a dinâmica da condução dos contenciosos e de suas repercussões na agenda comercial da OMC. Constata-se que, à margem do desenho institucional focalizado na Camex, a escolha das demandas responde à pauta comercial e ao impacto nas negociações internacionais do país, acompanhando a pauta de exportação e os principais parceiros comerciais do Brasil, no marco da Rodada Doha da OMC. Marcadas por constrangimentos internos e externos, portanto, as estratégias sobre litígios comerciais internacionais demandam transparência e cooperação aperfeiçoadas com o setor privado.
This Essay proceeds in four steps. Part I summarizes the quantitative evidence on the pattern of escalation and outcomes of more than 600 GATT/WTO disputes from 1948 through 1999. Part II elaborates on our theory of settlement bargaining within the context of an institution lacking enforcement power and shows how the hypotheses are consistent with the evidence introduced earlier. Part III discusses the theory's expectations regarding the effect of the 1989 and 1995 dispute settlement reforms and likewise compares those predictions with the evidence. Part IV highlights the implications of our perspective for proposed future reforms dealing with transparency and developing country participation
Studies of the General Agreement on Tariffs and Trade (GATT) stress the role of formal panels in adjudicating trade conflicts. Yet most cases are settled beforehand in informal consultations. This article tests two sets of hypotheses about the decision to escalate GATT cases, one concerning the significance of the right to a panel, the other concerning the effects of political regime type. Results show that the right to a panel did not inspire more early settlement, more escalation, or more resolution through concessions at the panel stage; however, highly democratic dyads are more likely to achieve concession, but only at the consultation stage. This suggests that a strategy of tying hands, rather than adherence to legal (and other) norms of conflict resolution, is likely to shed light on the way democracies use formal third-party adjudication at GATT.
The proliferation of international rules, laws, and institutional forms raises important questions for regime theory. Looking at the theoretical and empirical arguments presented by all the contributors, however, it seems clear that that complexity's effects on actor strategies—particularly powerful actors—remain open to debate. Some of the posited effects of international regime complexity have contradictory or cross-cutting effects. Further effects of regime complexity—cross-institutional strategizing, the asymmetrical distribution of legal and technical expertise, and the fragmentation of reputation—can erode the significance of institutions in complex environments. This contribution considers the effect that regime complexity has on how powerful actors approach world politics—in part by connecting the current debate with past discussions about the significance of international regimes in world politics.
Democratic and autocratic states routinely violate their international agreements protecting human rights. Scholars typically study this phenomenon by focusing on ratification or compliance behavior separately. In our view, these behaviors are inherently linked, and our analysis should address the link explicitly. We consider how domestic judiciaries influence the joint choice to ratify and comply with international human rights regimes. Using data on the ratification status of states under the Convention Against Torture (CAT) and states' torture practices, we find that the joint probability of being ratified under the CAT and violating its terms decreases in the effectiveness of a state's judiciary; and that the joint probability of not being ratified and engaging in behavior proscribed by the CAT increases in the effectiveness of a state's judiciary. The paper suggests that while effective judiciaries offer the promise of an enhanced international human rights law, it is in part a false one. Where judiciaries constrain, states are more likely to avoid these regimes and violate human rights anyway. Where judiciaries do not constrain, states are likely to join and ignore their obligations.
Although scholars have made considerable progress on a number of important research questions by relaxing assumptions commonly used to divide political science into subfields, rigid boundaries remain in some contexts. In this essay, we suggest that the assumption that international politics is characterized by anarchy whereas domestic politics is characterized by hierarchy continues to divide research on the conditions under which governments are constrained by courts, international or domestic. We contend that we will learn more about the process by which courts constrain governments, and do so more quickly, if we relax the assumption and recognize the substantial similarities between domestic and international research on this topic. We review four recent books that highlight contemporary theories of the extent to which domestic and international law binds states, and discuss whether a rigid boundary between international and domestic scholarship can be sustained on either theoretical or empirical grounds.
Why do governments turn to the International Monetary Fund (IMF) and with what effects? This book argues that governments enter IMF programs for economic and political reasons, and finds that the effects are negative on economic growth and income distribution. By bringing in the IMF, governments gain political leverage - via conditionality - to push through unpopular policies. Note that if governments desiring conditions are more likely to participate, estimating program effects is not straightforward: one must control for the potentially unobserved political determinants of selection. This book addresses the selection problem using a dynamic bivariate version of the Heckman model analyzing cross-national time-series data. The main finding is that the negative effects of IMF programs on economic growth are mitigated for certain constituencies since programs also have distributional consequences. But IMF programs doubly hurt the least well off in society: they lower growth and shift the income distribution upward.
The role of legitimacy in international relations is a topic of much debate, yet there is little understanding of the mechanism behind it. Here I address this discrepancy by asking: are state threats perceived as (il)legitimate more or less likely to be successful? By operationalizing illegitimacy as unilateral action in the presence of a multilateral option, I consider the variation in the success of U.S. trade measures from 1975 to 2000. As I show, the (il)legitimacy of threats modifies the nature of the signal sent by concessions to those threats, and this effect can be measured and predicted. I find that, controlling for material pressure, perceived illegitimacy of U.S. trade threats decreases the likelihood of a target conceding by over 34 percent. Moreover, it pays to resist: targets that resist illegitimate unilateral measures from the United States are 25 percent less likely to encounter similar unilateral measures over the following five years.
Tese (doutorado)—Universidade de Brasília, Instituto de Relações Internacionais, Programa de Pós-Graduação em Relações Internacionais, 2007. Esta tese tem como objetivo central desenvolver exercício de reflexão sobre os canais de transmissão entre normas internacionais e políticas redistributivas. Mais especificamente, busca examinar como o reconhecimento e a exposição do Estado a normas e instituições internacionais podem condicionar a implementação de políticas redistributivas, nos âmbitos doméstico e internacional. O trabalho examina os fundamentos analíticos do tema: a “economia política” da redistribuição; o diálogo entre racionalistas e construtivistas na teoria das relações internacionais; e a crítica à hipótese do Estado unitário nas relações internacionais. Em seguida, são examinadas teorias da interação entre os ambientes doméstico e internacional, com ênfase especial na teoria dos “jogos de dois níveis”, que constitui referencial teórico a orientar o trabalho. A tese também discute teorias relativas ao impacto de normas e instituições internacionais, ressaltando a existência de três “mecanismos de transmissão”: estrutura de incentivos, estrutura de representação, e estrutura de identidade. O trabalho desenvolve modelo teórico, cuja principal conclusão geral seria a de que, sob determinadas condições, a “abertura” a normas e instituições internacionais pode induzir novo equilíbrio doméstico que facilita e/ou viabiliza a implementação de políticas redistributivas, anteriormente “vetadas” por coalizões de atores sociais. O modelo admite três possíveis equilíbrios – a integração plena, a integração incipiente, e o regime contestado -; por sua vez, o equilíbrio efetivamente alcançado dependeria de parâmetros como sensibilidade das preferências estatais à pressão internacional, dimensões relativas das coalizões domésticas, e custos “internos” e “externos” de descumprimento das normas internacionais. Em sua parte empírica, a tese analisa a relação entre normas internacionais e políticas redistributivas a partir de três estudos de caso: políticas de combate à discriminação racial no Brasil, no período 1995-2005; políticas de combate à fome no Brasil, no período 1995-2005; e a política de assistência ao desenvolvimento do Reino Unido, no período 1997-2005. O estudo relativo ao combate ao racismo é aquele que apresenta resultados mais próximos dos elementos salientados no modelo teórico; conforme apresentado, o processo de preparação e de seguimento da Conferência de Durban sobre o Combate ao Racismo teria viabilizado “momento político” propício à implementação de políticas de ação afirmativa no Brasil. Os estudos indicam, ainda, que a conjugação de três fatores – preferências governamentais, grupos organizados e canais de acesso ao processo decisório – seria a base da gênese e da consolidação de coalizões domésticas pró-redistribuição. _______________________________________________________________________________ ABSTRACT The main goal of this thesis is to provide a contribution to the academic thinking on the transmission channels from international norms to redistributive policies. More precisely, it analyzes how the acceptance of international norms and the exposure to international institutions may influence the implementation of redistributive policies, both at the domestic and the international levels. The analytical foundations of the work are highlighted: the ‘political economy’ of redistribution; the dialogue between rationalism and constructivism in the international relations theory; and critical views on the assumption of the unitary state. In the sequence, the thesis examines theories of the interaction between the domestic and the international scenes, with a particular focus on the ‘two-level games’ theory, which provides its main theoretical guideline. Furthermore, theories of the impact of international norms and institutions are discussed, with the identification of three ‘transmission channels’: the incentive structure, the representation structure and the identity structure. A theoretical model is developed around one main general conclusion: under certain conditions, the interaction with international norms and institutions may shift the domestic equilibrium towards the implementation of redistributive policies, in contrast to an alternative equilibrium where those policies are blocked by domestic coalitions. Three different equilibria can be reached in the model - the ‘full integration’, the ‘incomplete integration’ and the ‘contested regime’; the equilibrium to be ultimately reached will depend on the model’s parameters, such as the sensivity of the state preferences to the international pressure, the relative size of the domestic coalitions, and the internal and external costs of noncompliance with international norms. In its empirical section, the thesis analyzes the relation between international norms and redistributive policies in three case studies: policies against racial discrimination in Brazil, from 1995 to 2005; policies to combat hunger in Brazil, from 1995 to 2005; and the development aid policies in the United Kingdom, from 1997 to 2005. The study on the policies against racial discrimination is the case which best fits the theoretical model; according to the study, the preparation of and the follow-up to the World Conference Against Racism (Durban) would have increased the political feasibility of affirmative action policies in Brazil. The studies also show that the interplay of three factors – government preferences, organized groups and access channels to the decision-making – would lie underneath the constitution and the consolidation of pro-redistributive domestic coalitions.
ABSTRACT On 1 January 1995, the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) entered into force. Until August 2006, the DSU has since been applied to 348 complaints – more cases than dispute settlement under the GATT 1947 had dealt with in nearly five decades. The system is perceived, both by practitioners and in academic literature, to work generally well. However, it has also revealed some flaws. Negotiations to review and reform the DSU have been taking place since 1997 ("DSU review"), however, without yielding any result so far. In the meantime, WTO Members and adjudicating bodies managed to develop the system further through evolving practice. While this approach may remedy some practical shortcomings of the DSU text, the more profound imbalance between relatively efficient judicial decision-making in the WTO (as incorporated in the DSU) and nearly blocked political decision-making evolves into a serious challenge to the sustainability of the system. This article provides an overview of the first eleven years of DSU practice and the current DSU review negotiations. An outlook for future challenges to the system is also given. Moreover, specific chapters of the text focus on the role of India in WTO dispute settlement, her use of the system and her participation in the DSU review negotiations. JEL Classification: F02, F13, K33, K41
Preferential trading arrangements (PTAs) have spread widely over the past fifty years. During the same era, multilateral openness has grown to unprecedented heights, spurred by the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO). If the cornerstone of the manifestly successful multilateral regime is nondiscrimination, why have its members increasingly resorted to preferential liberalization? We argue that developments at the heart of GATT WTO encourage its members to form PTAs as devices to obtain bargaining leverage within the multilateral regime. Specifically, the growth in GATT WTO membership, the periodic multilateral trade negotiation rounds, as well as participation and, especially, losses in formal GATT WTO disputes, have led its members to seek entrance into PTAs. Conducting the first statistical tests on the subject, we find strong evidence in support of this argument.For helpful comments, we are grateful to Marc Busch, Peter Gourevitch, David Lake, Lisa Martin, Joy Mazumdar, Helen Milner, Thomas Oatley, aglar zden, Francisco Parodi, Jon Pevehouse, Jay Smith, Jeffrey Stacey, Chris Zorn, and two anonymous reviewers. For research assistance, we thank Yoram Haftel, Jesse Hamner, and Jon Pevehouse. Earlier versions of this article were presented at the 2000 Annual Meeting of the American Political Science Association, Washington, D.C.; the 2001 Annual Meeting of the Midwest Political Science Association, Chicago; and seminars at Emory University, the University of Chicago (PIPES), the University of Illinois, and the University of Wisconsin.
Cooperation and discord in world politics are explained to a considerable extent by the three factors discussed in the Introduction: mutuality of interest, the shadow of the future, and the number of players. Yet the context of interaction, perceptions, and strategies is also important. Issues are linked to one another through multilevel games, which may be compatible or incompatible. Whether reciprocity constitutes an effective strategy depends both on linkages among issues and on the institutions within which negotiations take place. Perceptions are always significant and often decisive. Decision makers often actively seek to change the contexts within which they act by linking issues, trying to alter others' perceptions, establishing institutions, and promoting new norms. This finding suggests the importance of linking the upward-looking theory of strategy with the downward-looking theory of regimes.
It is often argued that the EMS is an effective disciplinary device for inflation-prone countries in Europe, since it forces the respective policy-makers to pursue more restrictive monetary policies than they would otherwise. It is not clear, however, why these countries should submit themselves to such discipline. This paper argues that, to answer this question appropriately, one must consider that EMS membership brings potentially large credibility gains policy-makers in inflation-prone countries: the reason is that not only it attaches an extra penalty to inflation (in terms of real appreciation), but makes the public aware that the policy-maker is faced with such penalty, and thus helps to overcome the inefficiency stemming from the public's mistrust of the authorities.
Studies of international institutions, organizations, and regimes have consistently appeared in the pages of International Organization. We review the theoretical and empirical work on international institutions and identify promising directions for the institutionalist research program. Early studies of international institutions were rich with empirical insights and often influenced by theoretical developments in other fields of political science, but lacking an overarching analytical framework they failed to produce a coherent body of scholarship. Current efforts to reinvigorate the study of international institutions draw on a new body of theory about domestic institutions. We argue that the assumptions of this new approach to institutions are more appropriate to international studies than those of earlier attempts to transfer theories across levels of analysis. We suggest that the most productive questions for future research will focus on specifying alternative mechanisms by which institutions can influence outcomes and identify particular sets of questions within this agenda that are especially promising.
This paper analyzes the sustainability of fixed exchange rates by extending the time inconsistency framework to a fully dynamic context in which the level of a state variable (in this case debt) determines the payoffs available to the government at each point in time. The model yields the following results. If debt is sufficiently low, there is an equilibrium in which the government does not devalue. For an intermediate range of debt levels, the government devalues in response to an attack but not otherwise, so that self-fulfilling attacks can occur. Finally, for yet another debt range there can also be sunspot equilibria in which an attack (and the corresponding devaluation) occurs with positive probability.
Preface. I. Introduction: International Law, International Organizations and Dispute Settlement - The WTO Agreement as a Model for Protecting Freedom, Non-Discrimination and Rule of Law Across Frontiers? II. The GATT Dispute Settlement System 1948-1995: An Overview. III. Clarification and Development of GATT/WTO Law Through Violation Complaints: The Example of Trade-Related Environmental Measures. IV. Non-Violation Complaints and Situation Complaints in GATT/WTO Law: What is Their Legitimate Function? V. The New Dispute Settlement System of the 1994 WTO Agreement: An Overview. VI. The Future of the GATT/WTO Dispute Settlement System: First Experiences and Remaining Problems. Tables. Annexes: A. Table of Panel Reports Issued Under Article XXIII of the GATT 1947. B. Table of Panel Reports Issued Under the Tokyo Round Agreements of 1979. C. Table of Disputes Initiated Under the Dispute Settlement Understanding of the 1994 Agreement Establishing the World Trade Organization in 1995. D. Text of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). E. The WTO Appellate Body Working Procedures for Appellate Review. Index.
Abstract Why do states initiate trade disputes under the General Agreement on Tariffs and Trade (GATT) or its successor, the World Trade Organization (WTO)? Existing studies suggest that democracies,should either experience fewer trade conflicts or at least resolve them more cooperatively. Other works contend that the filing of complaints itself constitutes proof of the efficacy of the trade dispute settlement regime, and that changes in that regime account for the rising number,of trade complaints in recent years. This paper provides the first large-scale test of these hypotheses and others, using multivariate regression and exhaustive new data on dispute initiation within all GATT/WTO directed dyads from 1948 through 1998. The evidence contradicts prevailing explanations. It turns out that democracies experience more trade conflict, not less, and they resolve their disputes less cooperatively as well. Moreover, changes in the dispute settlement regime have had little impact. 1 “Whoever speaks of dispute settlement in GATT must start from nearly nothing.”
secondment from the World Bank. The views expressed in this paper are entirely those of
Multilateral trade complaints are significant for politics because they serve as a stimulus for the targeted state to alter its status quo trade policy. This paper seeks to explain and predict patterns of multilateral trade complaints filed by states under the dispute settlement mechanism of the General Agreement on Tariffs and Trade (GATT) and its successor as of 1995, the World Trade Organization (WTO). A two-level model of complaint-raising is proposed, which argues that variation in the design of GATT and WTO institutions affects the costs to governments of filing complaints -- such as bureaucratic costs, information costs, and opportunity costs -- and these costs in turn affect state strategies for domestic oversight of treaty compliance by one's trading partners. Specific hypotheses drawn from the model are tested against a data set of over 300 multilateral trade complaints, from 1948-1994 under the GATT and 1995-96 under the WTO. The high visibility of the World Trade Organization, founded amid much political fanfare and media attention on 1 January 1995, has made multilateral trade disputes brought under the auspices of the WTO front-page news. The binding nature of the new dispute-settlement system even became an election-year issue in the U.S., as Patrick Buchanan and Republican presidential nominee Bob Dole voiced fears that national sovereignty would be constrained by impartial panels of international judges. 1 Multilateral trade complaints are indeed significant because they have distributional consequences both domestically and internationally. At the domestic level, a successfully litigated complaint can produce highly excludable benefits for a particular industry or sector. For example, U.S. leather exporters obtained improved market access to Japan, when that country removed quantitative restrictions following a GATT panel ruling in 1983 supporting a U.S. complaint. 2 At the international level, a country's compliance with the agreements is only at issue when a trade-related complaint is raised by another contracting party to the agreement. Once an international
With this comment, former British Foreign Secretary Geoffrey Howe recognised a critical point: the myth of a grasping, bureaucratic, centralising, unaccountable ‘Europe’ embodied in the European Commission can be extremely useful in domestic politics. This chapter explores this ‘leveraging’ role of the Commission in the critical policy area of Member State aids to industry. There are three principal reasons why this portion of competition policy creates an ideal environment for political actors to gain leverage by invoking actions of the Commission. First, state aids are by nature transfers of government funds to public or private entities with narrow but deeply committed constituencies. Even where governments wish to curtail such transfers,1 the political price for deciding against powerful domestic constituencies may be quite high, or the strength of the political opposition or internal party rivals may in effect block such policies. Second, the Commission’s demands may be credibly invoked because the Commission has the legal authority to enforce decisions on state aids. And thirdly, the review of state aids is a negotiated process that takes place privately between Commissioners and political executives of Member State governments.
Disputes under the General Agreement on Tariffs and Trade (GATT) exhibit a puzzling selection effect. Defendants concede more prior to GATT judgments than afterward, despite GATT's lack of enforcement power. Yet, why would states plea-bargain if they know they can spurn contrary rulings? To find out, the article develops an incomplete information model of trade bargaining with the option of adjudication. The plaintiff has greater resolve prior to a ruling, believing that the defendant might be compelled to concede to an adverse judgment—even if that belief later proves false. Surprisingly, this resolve induces more generous settlements even from defendants who intend not to comply with any ruling. After a ruling, however, this anticipatory effect is irrelevant: adjudication works best when threatened but not realized. The prospect of adjudication thus conditions the behavior of states even when enforcement is not forthcoming but not through mechanisms identified by previous studies.
Globalization is exposing social fissures between those with the education, skills, and mobility to flourish in an unfettered world market--the apparent "winners"--and those without. These apparent "losers" are increasingly anxious about their standards of living and their precarious place in an integrated world economy. The result is severe tension between the market and broad sectors of society, with governments caught in the middle. Compounding the very real problems that need to be addressed by all involved, the kneejerk rhetoric of both sides threatens to crowd out rational debate. From the United States to Europe to Asia, positions are hardening. Author Dani Rodrik brings a clear and reasoned voice to these questions.Has Globalization Gone Too Far? takes an unblinking and objective look at the benefits--and risks--of international economic integration, and criticizes mainstream economists for downplaying its dangers. It also makes a unique and persuasive case that the "winners" have as much at stake from the possible consequences of social instability as the "losers." As Rodrik points out, ". . . social disintegration is not a spectator sport--those on the sidelines also get splashed with mud from the field. Ultimately, the deepening of social fissures can harm all." President Clinton read the book and it provided the conceptual basis for the trade/IMF portions of his State of the Union message in January 1998. * Globalization is "the next great foreign policy debate," Thomas Friedman of the New York Times wrote, and he found Has Globalization Gone Too Far? "provocative" on the subject. This book provides a critical definition--and welcome clarity--to that debate.
The paper discusses the role of credibility factors in the conduct of exchange rate policy in developing countries. The analysis is based on a simple framework in which policymakers are concerned about inflation and external competitiveness. Price setters in the nontradable sector of the economy engage in a strategic game against the authorities. The model generates a ‘devaluation bias’ which undermines the credibility of a fixed exchange rate. The role of reputational factors, signaling considerations, and joining a currency union as possible solutions to this bias is examined.
The political economy of trade policy has largely neglected popular election. When legislatures determine protection, politicians supply tariffs that are demanded by their constituents. A model of this political market is specified and tested with data related to the McKinley Tariff of 1890. An index of the extent to which tariff protection accrued to individual congressional districts is applied, along with demand and supply variables, to three questions: Did representatives supply tariffs to their districts as the model predicts? Did they vote in accordance with the district tariff interest in the roll-call vote on the McKinley Tariff? Did electors reward representatives for the district tariff protection in a manner consistent with a political market model? Empirical estimations based on the model provide answers that are generally affirmative and appear to be inconsistent with the traditional view that the Republic defeat in 1890 was a result of the McKinley Tariff. Copyright 1991 by MIT Press.
Predicting corporate distress can have a significant impact on the economy because it serves as an efficient early warning signal. This study develops distress prediction models incorporating both governance and financial variables and examines the impact of major corporate governance attributes, i.e., ownership and board structures, on the likelihood of distress. The two widely documented methods, i.e., logit and neural network approaches are used. For an emerging market economy where ownership concentration is common, we show that not only financial factors but also corporate governance factors help determine the likelihood that a company will be in distress. Our prediction models perform relatively well. Specifically, in our logit models that incorporate governance and financial variables, more than 85% of non-financial listed firms are correctly classified in our models. When we consider the Type I error, on average the models have the Type I error of about 9%. Likewise, the neural network prediction models appear to have good results. Specifically, the average accuracy of the neural network prediction models ranges from approximately 84% to 87% with the average Type I error raging from about 10% to 16%. Such evidence indicates that the models serve as sound early warning signals and could thus be useful tools adding to supervisory resources. We also find that the presence of controlling shareholders and the board involvement by controlling shareholders reduce the probability of corporate financial distress. This evidence supports the monitoring/alignment hypothesis. Finally, our results suggest evidence of the benefits of business group affiliation in reducing the distress likelihood of member firms during the East Asian financial crisis.
Thesis (Ph. D.)--Columbia University, 1997. Includes bibliographical references. Photocopy.
The Nice and Laeken Declarations put at the top of the agenda of EU reform the attainment of a clearer delimitation of the EU powers. This project is taking place in the context of a system of competences which is problematic in various senses. One of the items falling within the mandate of the Convention on the future of Europe includes the reform of the principle of subsidiarity. The emerging proposals for the reform of subsidiarity are, however, more directed towards legitimacy deficits than towards tensions in the competence system. Indeed, parallel to the competences issue, the claim for a larger role for national parliaments in the EU has come to intersect with the competence dossier, and to a larger extent this claim has reconstructed subsidiarity procedures into an answer to legitimacy deficiencies in the EU.
This paper emphasizes the range of factors which enter country calculations to seek regional trading arrangements. These include conventional access benefits, but extend to safe haven concerns, the use of trade arrangements to underpin security arrangements, and tactical interplay between multilateral and regional trade negotiating positions. In a final section, results from an earlier modelling effort by Perroni and Whalley are used to emphasize that non- traditional objectives may be quantitatively more important than traditionally analyzed objectives.
Why should multilateral lending exist in a world where private capital markets are well developed and governments have their own bilateral aid programs? If lending by the World Bank, IMF, and regional development banks has an independent rationale, it must rest on advantages generated by the multilateral nature of these institutions. There are in principle two such advantages. First, since information on the quality of investment environments in different countries is in many ways a collective good, multilateral agencies are in a better position to internalize the externalities that may arise. This creates a rationale for multilateral lending in terms of information provision, particularly in terms of monitoring of government policies in recipient countries. Second, as long as multilateral agencies retain some degree of autonomy from the governments that own them, their interaction with recipient countries, while official in nature, can remain less politicized than inter- governmental links. This in turn endows multilateral agencies with an advantage in the exercise of conditionality, (that is, in lending that is conditional on changes in government policies). Neither of these two potential advantages of multilateral lending has much to do with lending per se. However, multilateral lending may be required to make these agencies' tasks incentive compatible. The empirical analysis reveals little evidence that multilateral lending has acted as a catalyst for private capital flows.
David M. Gould argues that free trade agreements can help developing countries establish the credibility essential to successful trade reform. Credibility, he explains, is necessary if trade reform policies are to entice investment into the economic sectors where the liberalizing country has its greatest comparative advantage. As Gould explains, a free trade agreement enhances the credibility of trade reform policies by providing evidence of a government's long-term commitment to free trade and by discouraging protectionist policies in foreign markets. Gould concludes with an outlook for U.S.-Mexican free trade.
One of the eventual consequences of the global debt crisis was a wave of market-oriented economic reforms. This paper discusses the state of our knowledge on the political economy of this process. Why were inefficient, and often unsustainable policies maintained for so long? Why are so many governments reforming now, after decades of adherence to policies of an opposite kind? Have the reformers internalized the correct lessons from the East Asian experience? Finally, are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain?
Analysis of interest differentials in the European Monetary System has suggested a widespread lack or credibility of the Exchange Rate Mechanism (ERM) in the sense that in most countries the implicit expected rate of devaluation was significant and not far short of inflation differentials vis-a-vis the deutschmark. The authors present and test a model in which prices reflect expectations of exchange rate behavior. The results provide mixed evidence that price-setting in countries that participated in the ERM was influenced by the exchange rate discipline. Copyright 1997 by Royal Economic Society.
It is often argued that the EMS is an effective disciplinary device for inflation-prone countries in the EEC, since it forces policy-makers in these countries to pursue more restrictive monetary policies than they would otherwise. It is not clear, however, why these countries should submit themselves to such discipline. This paper argues that in order to answer this question appropriately, one must consider that EMS membership brings potentially large credibility gains to policy-makers in high-inflation countries: the reason is that not only it attaches an extra penalty to inflation (in terms of competitiveness losses), but makes the public aware that the policy-maker is faced with such penalty, and thus helps to overcome the inefficiency stemming from the public's mistrust for the authorities. We study the conditions under which these credibility gains are larger than the penalties that the policy-maker incurs in equilibrium. When policy-makers attach no value to inflationary finance, we find that they will always prefer EMS membership. When the policy-maker needs revenue from the inflation tax, however this conclusion is not always true. The opposite contention, that EMS membership is an inferior regime for any government that needs inflationary finance is also generally incorrect. The outcome of the welfare comparison depends (i) on the value placed by the policy-maker on seigniorage relative to the discounted output cost of inflation, and (ii) on the tightness of EMS discipline, as measured by the time interval between realignments and by the portion of lost competitiveness that the country is not allowed to recover at realignments.
This paper assesses whether the program of trade liberalization undertaken by Mexico after 1985 was undermined by lack of credibility. It provides an empirical counterpart to some of the credibility issues that have been discussed elsewhere in the literature and proposes a methodology, based on the estimation of a probit model, to measure the probability of trade policy reversal due to the likelihood of occurrence of a balance of payments crisis. It is shown that the probability of trade policy reversal reduced indeed the rate of capital accumulation during the first years of the reform.
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
Statement by the Director-General, General Council World Trade Organization Choosing Union: Monetary Politics and Maastricht
- Renato Ruggiero
Ruggiero, Renato. 1998. " Statement by the Director-General, General Council, 24 April 1998. "
World Trade Organization. http://www.wto.org/wto/speeches/state17.htm
Sandholtz, Wayne. 1993. " Choosing Union: Monetary Politics and Maastricht. " International
Organization 47(Winter):1-39.
The Participation of the Developing Countries in the WTO Policy Research Working Paper 1906
- Constantine Michalopoulos
Michalopoulos, Constantine. 1998. " The Participation of the Developing Countries in the WTO. "
Policy Research Working Paper 1906. World Bank.
http://www.worldbank.org/html/dec/Publications/Workpapers/WPS1900series/wps1906/wps
1906.pdf
Milner, Helen V. 1997. Interests, Institutions, and Information: Domestic Politics and
International Relations. Princeton: Princeton University Press.
Making Commitments: France and Italy in the European Monetary System, 1979-1985
- Jeffry Frieden
Frieden, Jeffry. 1994. "Making Commitments: France and Italy in the European Monetary
System, 1979-1985." In The Political Economy of European Monetary Integration, ed. Barry
Eichengreen and Jeffry Frieden. Boulder: Westview. Pp. 25-46.
Out-of-Equilibrium Beliefs and Out-of-Equilibrium Behavior
- David M Kreps
Kreps, David M. 1989. "Out-of-Equilibrium Beliefs and Out-of-Equilibrium Behavior." In The
Economics of Missing Markets, Information, and Games, ed. Frank Hahn. New York:
Oxford. Pp. 7-44.
Testimony of Ambassador Charlene Barshefsky, U.S. Trade Representative, Hearing on Preparations for the Upcoming World Trade Organization Ministerial Meeting, United States Senate, Committee on Finance The Catalytic Effect of Lending by the International Financial Institutions
- Charlene Barshefsky
Barshefsky, Charlene. 1999. " Testimony of Ambassador Charlene Barshefsky, U.S. Trade
Representative, Hearing on Preparations for the Upcoming World Trade Organization
Ministerial Meeting, United States Senate, Committee on Finance. " September 29.
http://www.senate.gov/~finance/9-29bars.htm
Bird, Graham, and Dane Rowlands. 1997. " The Catalytic Effect of Lending by the International
Financial Institutions. " World Economy 20(November):967-91.
Trade Representative, Hearing on Preparations for the Upcoming World Trade Organization Ministerial Meeting, United States Senate, Committee on Finance
- Charlene Barshefsky
Barshefsky, Charlene. 1999. "Testimony of Ambassador Charlene Barshefsky, U.S. Trade
Representative, Hearing on Preparations for the Upcoming World Trade Organization
Ministerial Meeting, United States Senate, Committee on Finance." September 29.
http://www.senate.gov/~finance/9-29bars.htm
Statement by the Director-General, General Council
- Renato Ruggiero
Ruggiero, Renato. 1998. "Statement by the Director-General, General Council, 24 April 1998."
World Trade Organization. http://www.wto.org/wto/speeches/state17.htm
Issues Regarding the Review of the WTO Dispute Settlement Mechanism
- South Centre
South Centre. 1999. "Issues Regarding the Review of the WTO Dispute Settlement Mechanism."
Trade-Related Agenda, Development, and Equity Working Paper No. 1. South Centre.
http://www.southcentre.org/publications/trade/dispute.pdf
An Advisory Centre on WTO Law
- Development Trade
- Centre
Trade and Development Centre. 1999. "An Advisory Centre on WTO Law." Typescript.
http://www.itd.org/links/acwlintro.htm
- Axel Weber
Weber, Axel. 1991. "EMS Credibility." Economic Policy 12(April):57-102.