Stability and Rigidity: Politics and Design of the WTO's Dispute Settlement Procedure
The increased “legalization” embodied in the revised Dispute Settlement Procedure (DSP) of the World Trade Organization (WTO) is shown to be an institutional innovation that increases the opportunities for states to temporarily suspend their obligations in periods of unexpected, but heightened, domestic political pressure for protection. This increased flexibility in the system reduces per-period cooperation among states but also reduces the possibility that the regime may break down entirely. There is shown to be a trade-off between rigidity and stability in international institutional design in the face of unforeseen, but occasionally intense, domestic political pressure. In a model with a WTO that serves both an informational and adjudicatory role, it is established that agreements with DSPs are self-enforcing, are more stable, and are more acceptable to a wider variety of countries than agreements without DSPs. Evidence drawn from data on preferential trading agreements supports the key hypotheses.
c1 B. Peter Rosendorff is Associate Professor, International Relations and Economics, and Director, Center for International Studies, University of Southern California, University Park, Los Angeles, CA 90089-0037. Email: [email protected]. Thanks to Bill Ethier, Todd Sandler, Helen Milner, seminar participants at the Regional Integration Network Meeting in Montevideo, 2004; American Political Science Association Annual Meeting in Philadelphia, 2003; at Public Choice Society Annual Meetings, San Diego, March 2002; Latin American and Caribbean Economic Association Annual Meetings, Montevideo, Uruguay, October 2001, to the editor and three anonymous referees.