Why Adjudicate?: Enforcing Trade Rules in the WTO

The expansion of international law raises the problem of enforcing rules in the absence of a centralized prosecutor and police. What leads some states to challenge violations of their rights through legal action? This book argues that the answer lies in domestic accountability mechanisms and the role of law to facilitate communication. Democratic checks and balances encourage representation of domestic interests and place emphasis on public lawsuits over informal settlements. Whereas demands driven by domestic pressure could imperil international cooperation, adjudication offers a solution. Turning to legal dispute settlement helps states to signal resolve more effectively for better bargaining outcomes. Christina Davis tests this argument with analysis of trade disputes in the World Trade Organization, where democracies lead in the use of dispute settlement as both complainants and defendants. Statistical analysis shows that shifts in domestic political balance that empower the legislature lead to more adjudication. Qualitative evidence based on extensive interviews reveals how trade officials use legal complaints to manage domestic politics without risk of trade war. Case studies of the United States and Japan compare the role of legislative constraints in the trade policy process with detailed examination of disputes ranging from the Boeing-Airbus dispute over aircraft subsidies to Chinese intellectual property rights and U.S. anti-dumping policies for the steel industry. This book demonstrates that enforcement of trade rules is not just the realm of technocrats making decisions based on law and economics. Lobbying by industries, demands from the legislature, and political relations between countries influence which countries and cases appear in court. The politicized selection of legal complaints generates aspects of political theater in trade disputes, but proves effective nonetheless. In analysis of foreign trade barriers against U.S. exports, Davis shows that the United States gains better outcomes for cases taken to formal dispute settlement than for those negotiated. Case studies of Peru and Vietnam reveal that the law can also be an effective tool for developing countries. The power of law arises from the information it provides to actors at home and abroad about resolve to take action and mobilize the legitimacy of rule-based enforcement. Why do states turn to international courts to resolve their disputes? Liberal protesters on the streets condemn international organizations as servants of corporate interests, while conservative skeptics of international law reject intervention into state decision-making by international bureaucrats. Governments of both large and small states have reason to avoid courts. Powerful states like the United States and EU have tools for leverage in bilateral negotiations. Whether offering side-payments or threatening unilateral sanctions, they can influence the behavior of smaller states without need for a third party. At the same time, small developing countries fear legalization will merely introduce another tool where they lack capacity and cannot defend their interests. It is not as if filing a law suit mobilizes a police force. For all of their “court-like” appearance, international courts are fundamentally different from domestic courts because they lack the authority to impose their rulings in an anarchic international system. Moreover, using courts is costly. Hiring lawyers, preparing formal briefs, and taking a dispute into the public arena costs time and money and it also risks injuring diplomatic relations. Nonetheless, we observe a clear trend toward legalization as more areas of international affairs are regulated by international law and the number and authority of international courts has grown. States are increasingly turning to courts to solve disputes. They do so in order to achieve better outcomes. The choice of adjudication represents a shift in process – not abdication of sovereignty. Governments negotiate international rules and decide when and how to enforce them. Often states retain gatekeeper status over which legal complaints are filed. They have discretion over whether to comply with rulings issued against them by international judges. Governments give up some control when they enter formal dispute settlement and open themselves to third party involvement, but this sacrifice of autonomy comes as a deliberate choice. Understanding the decision to use legal enforcement is critical for evaluating how international institutions shape state behavior. The effectiveness of any legal system depends upon the actions of the police, prosecutor, and judge. One must consider the interaction of law with the probability of enforcement. Given the same set of legal commitments and punishment standard, challenges to every small infraction push the system towards strict compliance while imperfect enforcement induces weak compliance. In the absence of a central prosecutor or police force, most international The literature interchangeably uses the terms litigation and adjudication. Following Abbott et al. (2000) and Trachtman (1999) I will generally use the term adjudication.