Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts

Kartik Agre

Abstract

The methods for resolving disputes in international commerce differ greatly across agreements. Some systems are quite legalistic, with standing tribunals that have powers and practices similar to those of national courts. Others are diplomatic, just demanding that the opposing nations make a sincere attempt to work things out via talks. In this work, I try to explain the enormous difference in institutional form among the more than sixty regional trade agreements signed after 1957. I find that the degree of legalism in each agreement is strongly correlated with the degree of economic asymmetry, in interaction with the proposed depth of liberalization, among member countries, in contrast to accounts that place emphasis on the transaction costs of collective action or the functional requirements of deep integration.