Does Legalization Matter? : Comparing Compliance with Dispute Settlement under the GATT and the WTO

Abstract

In this thesis I have investigated the effect the new legalized dispute settlement system introduced by the WTO in 1995 has had on compliance. A major objective has been to check the robustness of findings reported by Zangl (2008). Zangl claims to have found a change in countries behavior due to increased legalization. I have tested whether his findings extend to a different set of cases. The most important conclusions entailed by the analysis in the preceding chapters may be summarized in six points First, the dispute pairs I have analysed shows that power and state sovereignty remain significant factors in trade negotiations. The claim set forward by Hudec (1998, in Tangermann 2002: 254) that “if governments lack the political will to obey the rules, the rules will not work, no matter how well they are crafted”(ibid.) is still valid. Second, my analysis supports the institutional notion that international organisations can impact on countries behaviour, and that clearer rules and regulations, can make countries more willing to cooperate. Although power still plays a significant part in negotiations between countries, the new WTO rules seem to have enhanced cooperation. Third, my analysis suggests that when studying the effect international organisations have on compliance, the intentions towards a future trade policy held by the countries prior to a dispute is of importance. This is in keeping with the enforcement school’s claim that compliance can come from an already planned intention of change. Fourth, legalization can be used as a tool for convincing domestic actors that policy change is required. This is in keeping with the neoliberal school. Fifth, and paradoxically, legalization can further increase the power of an already powerful country. The possibility to appeal a Panel Report to the Appellate Body represents an opportunity for countries to delay the adoption of a report. The appeal function might serve to lengthen a period with a trade policy not in conformity with WTO rules. Finally, the US-Softwood lumber-dispute pair showed that the hope that legalization would prevent U.S. unilateralism was unwarranted (at least in this case). The United States is still willing to use the Trade Act of 1974 when its interests are threatened. This suggests that Zangl’s (2008) conclusions about a change in the trade related U.S. behaviour due to legalization must be modified.