Why Not Bargain? The Domestic Politics of Utilizing the World Trade Organization’s Dispute Settlement Mechanism
| Author | Sijeong Lim,Hyo Won Lee |
| DOI | http://doi.org/10.1177/0032321720978340 |
| Published date | 01 August 2022 |
| Date | 01 August 2022 |
| Subject Matter | Articles |
https://doi.org/10.1177/0032321720978340
Political Studies
2022, Vol. 70(3) 566 –585
© The Author(s) 2020
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/0032321720978340
journals.sagepub.com/home/psx
Why Not Bargain? The
Domestic Politics of
Utilizing the World Trade
Organization’s Dispute
Settlement Mechanism
Sijeong Lim1 and Hyo Won Lee2
Abstract
The World Trade Organization’s dispute settlement mechanism is based on either bilateral
bargaining or third-party rulings by a panel or the Appellate Body. When do countries utilize
the multilateral procedure, and under what conditions do they opt for a bilateral agreement?
Departing from previous studies emphasizing the role of the complainant in shaping the course
of the dispute settlement mechanism, this article offers an explanation based on the strategic
choices of respondents. This study suggests that the domestic political interests of respondent
governments determine the use of the dispute settlement mechanism’s multilateral track. We argue
that respondent governments choose the multilateral track to seek political cover for domestically
unpopular concessions to a complainant. Such cover is required when (1) the dispute at stake has
high public salience and (2) the respondent faces an upcoming election. Our hypotheses are tested
using World Trade Organization’s dispute cases from 1995 to 2017.
Keywords
World Trade Organization, dispute settlement mechanism, domestic politics, public salience,
election
Accepted: 8 November 2020
Introduction
Why do disputants resort to a dispute settlement mechanism’s (DSM) multilateral proce-
dures in some dispute cases and resort to bilateral resolutions in others? The World Trade
Organization’s (WTO) DSM includes a two-stage dispute settlement design involving
bilateral bargaining at the initial stage, followed by multilateral, third-party rulings by a
1Division of International Studies, Korea University, Seoul, South Korea
2Global Leadership Division, Yonsei University, Seoul, South Korea
Corresponding author:
Hyo Won Lee, Yonsei University, Seoul 03722, South Korea.
Email: leehyow@yonsei.ac.kr
978340PSX0010.1177/0032321720978340Political StudiesLim and Lee
research-article2020
Article
Lim and Lee 567
panel or the Appellate Body. The initial stage begins when a dispute is filed with the WTO
by a complainant who has incurred or is expected to incur losses owing to a respondent’s
violation of its free trade rules. The respondent has 60 days to reach a bilateral settlement
with the complainant. This bilateral track is often encouraged by the WTO because it can
keep litigation costs to a minimum and expedite settlement.1 The multilateral procedure
of the DSM begins when disputants fail to reach a bilateral agreement. Between 1995 and
2014, approximately 53% of the dispute cases brought to the WTO were settled by third-
party rulings (Lee, 2019).
To better understand the reasons behind pursuing the DSM, this article explores how a
respondent country’s domestic politics shape its incentives to utilize the multilateral pro-
cedure of the DSM. Existing studies of patterns of utilizing WTO-DSM focus on the legal
and material capacity of disputants as primary determinants (Bown, 2004, 2005a, 2005b;
Busch and Reinhardt, 2003) especially in the context of the complainant country, thus
marginalizing the importance of domestic politics. Some recent studies that pay attention
to domestic factors concentrate on how the economic interests of prominent industrial sec-
tors influence government choices (Brutger, 2017; Prusa and Rubini, 2013; Yildirim et al.,
2018). This article complements these existing studies by theorizing and empirically dem-
onstrating how the WTO’s multilateral DSM provides the respondent country’s govern-
ment with the political cover required to make domestically unpopular concessions.
The dearth of studies on the respondent’s role in the WTO-DSM is surprising given the
design of the DSM: when the respondent more or less accepts the complainant’s initial
accusation, it is more likely that the disputants can reach a bilateral agreement in time. It
is only when the respondent denies the accusation that the case proceeds to the multilat-
eral stage, where a panel (and, if necessary, the Appellate Body) decides on the case.
Therefore, it is pertinent to ask the following question: When do respondent countries opt
for a multilateral path?
Drawing on broader dispute settlement literature (Allee and Huth, 2006; Beardsley,
2010), we argue that the incumbent government of the respondent country has an incen-
tive to choose the multilateral procedure of the DSM to avoid political responsibility or
the political cost accrued from making concessions. More specifically, we posit that such
an incentive arises under two domestic conditions in particular: (1) when the dispute at
stake has high public salience and (2) when the incumbent government is facing an
upcoming election.
The first condition, high public salience, makes it politically costly for an incumbent
to settle a dispute through bilateral concessions because this will be scrutinized by the
public willing to punish the incumbent for caving in. The second condition, an upcoming
election, makes it potentially too risky for an incumbent to make a bilateral concession as
losing votes may result. To be sure, not many disputes have high domestic salience in the
respondent country at the time of the accusation. We speculate that upcoming elections
make a bilateral concession costly even for cases that were initially not well known to the
public because in the campaign season, the opposition parties will publicize and frame
such concessions as a sign of the incumbent’s weakness vis-à-vis a foreign adversary. A
government can signal its resolve to the public by opting for the multilateral procedure of
the DSM. When asked by the WTO to correct its behavior, the government can justify its
compliance with the ruling backed by the legitimacy of the WTO.
We test these expectations using WTO dispute settlement cases from 1995 to 2017.
The domestic salience of a dispute is operationalized in two ways. First, domestic sali-
ence is high when the outcome of the dispute settlement is directly related to the basic
To continue reading
Request your trial