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Manchester Journal of International Economic Law

Volume 11, Issue 3: 367-396, 2014

Regional Trade Agreements and the Paradox of Dispute Settlement

Marc D. Froese

ABSTRACT: This article addresses the paradox of trade dispute settlement in which countries

allocate resources to the creation of dispute settlement mechanisms in regional trade agreements

even as the WTO's system has become the primary forum for the arbitration of state-to-state disputes.

I argue that while the WTO remains the primary insurance against the breakdown of trading

relations, these new instruments play a political role in securing the gains of regional andmultilateral liberalization (real and potential) against the possibility of multilateral failure. The

paper reviews literature on the institutional and conceptual developments in the study of regional

dispute processes, develops an empirical study of the rise of regional DSMs over time, and then

links this evidence to changing ways of conceptualizing the costs and benefits of trade

regionalization. A reinsurance hypothesis goes a ways towards explaining why countries negotiate

DSMs that for the most part, they do not use.

1. INTRODUCTION

Scholars have begun to remark upon the paradox of dispute settlement. As regional trade

agreements containing dispute provisions have proliferated, most disputes continue to go to the

World Trade Organization.1 This paper hypothesizes that the trend towards fully-articulated

dispute settlement mechanisms in regional trade agreements is driven by both the relative

success of the WTO’s DSU as well as a basic uncertainty about its future institutional

relevance.2 The paper traces the correlations between, on the one hand the rise of WTO dispute

settlement and the development of similar regional models, and on the other, the peaking of

that trend during the latter years of the Doha Round of trade negotiations. Using a time-

sequence methodology, I argue that the creation of regional dispute settlement mechanisms

(DSMs) peaked in 2009, not in spite of the WTO’s noted success in dispute settlement, but

precisely because of that success.

Marc D. Froese is Associate Professor of Political Science and Founding Director of the International Studies

Program at Canadian University College in Lacombe, Alberta.1 Claude Chase, Alan Yanovich, Jo-Ann Crawford & Pamela Ugaz, ‘Mapping Dispute Settlement Mechanisms in

Regional Trade Agreements: Innovative or Variations on a Theme?’ WTO Economic Research and Statistics Division, Staff Working Papers (World Trade Organization, 2013).

2 Jeffrey L. Dunoff, ‘The Politics of International Constitutions: The Curious Case of the World TradeOrganization,’ in Jeffrey L. Dunoff & Joel Trachtman (eds.), Ruling the World? Constitutionalism, International

Law, and Global Governance (Cambridge University Press, 2009).


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Building on the conceptual work of Slaughter, Drezner, and Drahos, this paper examines

a number of hypothetical claims about the uses of DSMs in RTAs, and then argues that regional

dispute settlement provisions are an attempt to securitize the risks of liberalization.3 In effect,

when countries sign regional agreements with dispute provisions they are purchasing a form of

reinsurance. While the WTO remains the primary insurance against the breakdown of tradingrelations, the development of new instruments through which to leverage the gains from trade

requires a securitization of those gains (real and potential) against the possibility of multilateral

failure.4 It is not a coincidence that the vast majority of RTAs with DSMs were signed between

2001 and 2013, throughout the long and uncertain Doha Round of multilateral negotiations.

Reinsurance in the trading order, as in financial markets, is both an expression of confidence in

the overall health of the system as well a bulwark against the remote, yet real possibility of

institutional failure.5

This reinsurance hypothesis goes a ways towards explaining why countries negotiate

DSMs that for the most part, they do not use. In order to test this hypothesis the article will

examine the extent to which regional DSMs have converged towards the WTO's model of an

autonomous judicial mechanism with automatic outcomes and binding decisions.6 In doing so,

we follow two parallel lines of enquiry. The first examines the extent of DSM development in

RTAs, developing a typology with which to classify mechanisms according to the extent which

they resemble dispute settlement at the WTO. The second examines the intensification of DSM

creation, charting the timing of negotiated DSMs in RTAs and examining the extent to which

the proliferation of RTAs has meant an intensification of the rate at which parties develop

DSMs.

Importantly, the hypothesis speaks to the larger issue of how to conceptualize the overall

direction of the growth of international economic law.7 First, it examines the extent to which

the certain conceptual models coming out of international relations speak to changes underway

in the trading system.8 For example, Slaughter's community of courts hypothesis offers a

potentially powerful lenses through which to examine the globalization of judicial mechanisms.

It also speaks to the functionalist argument currently circulating in legal circles about the

WTO's quasi-constitutional impact upon international economic law. Second, the hypothesis

3 In particular see Anne-Marie Slaughter, ‘A Global Community of Courts’, Harvard International Law Journal ,

2003, 44: 191-219; Daniel W. Drezner, ‘The Tragedy of the Global Institutional Commons,’ in Martha Finnemore& Judith Goldstein (eds.), Back to Basics: States Power in a Contemporary World (Oxford University Press, 2013);Peter Drahos, ‘Weaving Webs of Influence: The United States, Free Trade Agreements and Dispute Settlement’,

Journal of World Trade, 2007, 41: 191-210.4 Edward D. Mansfield & Eric Reinhardt, ‘Multilateral Determinants of Regionalism: The Effects of GATT/WTO

on the Formation of Preferential Trading Arrangements’, International Organization, 2003, 57: 829-62.5 Donald F. McIsaac and David F. Babbel, ‘The World Bank Primer on Reinsurance,’ 1995, World Bank, http://el

ibrary.worldbank.org/doi/book/10.1596/1813-9450-1512.6 E.g. see Kal Raustiala, ‘Institutional Proliferation and the International Legal Order,’ in Jeffrey L. Dunoff & MarkA. Pollack (eds.), Interdisciplinary Perspectives on International Law and International Relations: The State of the

Art (Cambridge University Press, 2013); see also Alter, Karen J., The New Terrain of International Law: Courts,

Politics, Rights (Princeton University Press, 2014).7 Joel P. Trachtman, The Future of International Law: Global Government (Cambridge University Press, 2013).

8 Anne-Marie Slaughter, ‘International Law and International Relations Theory: Twenty Years Later,’ in Jeffrey L.Dunoff & Mark A. Pollack (eds.), Interdisciplinary Perspectives on International Law and International Relations:

The State of the Art (Cambridge University Press, 2013).


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addresses newer questions about the potential future political effects of a proliferation of

judicial mechanisms, suggesting that Drezner’s institutional viscosity hypothesis, while

potentially useful in a number of settings, may not hold in this case. Ultimately, the study offers

the possibility of an empirically grounded account of the place of the WTO in the evolving

network of regional trade governance.9

The next section examines the recent literature on the place of dispute settlement in

regional trade governance, paying particular attention to attempts by the literature to explain

the development of regional DSMs and account for the relative lack of dispute settlement

activity at the regional level.10 The goal of the literature review is to link two bodies of

knowledge, the first being literature on the design, function and legal implications of regional

dispute settlement and the second being the literature on the challenges of conceptualizing the

scope and impact of the growing sphere of international economic law.11

Building upon this theoretically informed foundation, the third section develops atypology of dispute settlement mechanisms that is rooted in previous studies, but shifts focus

from a judicial comparison to an institutional assessment of dispute mechanisms as they are

articulated in RTAs. I use a time-sequence method for tracing the developmental trajectory of

regionalization in order to explain typological development between 1947 and 2013. This

empirical study of the paper's central hypothesis examines two parallel lines of inquiry - the

growth of regional DSMs and the intensification of the development of certain forms of dispute

settlement mechanism.

The fourth section examines the findings of the empirical study, suggesting a number of

implications for the conceptualization of regional DSM developmental dynamics. In particular,it discusses the implications for Slaughter’s community of courts hypothesis, Drezner’s

institutional viscosity hypothesis and the hypothetical proposition of this paper. The study

concludes with a note on further research and a comment on the type of data that ought to be

collected over the next ten years in order to expand our understanding of both the place of the

WTO’s DSM in the global trading system and the implications for dispute settlement at the

regional level.

2. R EGIONAL DISPUTE SETTLEMENT MECHANISMS: LEGAL AND POLITICAL

DIMENSIONS

Within the large and multidisciplinary body of research on the politics of international

economic law, the growth of literature on regional trade agreements has not kept pace with the

development of the agreements themselves.12 However, over the past several years, a number

of studies have begun to come to terms with the scope and depth of this emerging body of

9 H. Jo & H. Namgung, ‘Dispute Settlement Mechanisms in Preferential Trade Agreements: Democracy,

Boilerplates and the Multilateral Trade Regime’, Journal of Conflict Resolution, 2012, 56(6): 1041-68.10 Laura Gomez-Mera & Andrrea Molinari, ‘Overlapping Institutions, Learning and Dispute Initiation in RegionalTrade Agreements: Evidence from Latin America’, International Studies Quarterly, 2013, 58(2).

11 Andreas F. Lowenfeld, International Economic Law (Oxford University Press, 2002) chapter 1.12 See the ‘Introduction’ in Broude, Tomer, Marc L. Busch & Amelia Porges (eds), The Politics of International

Economic Law (Cambridge University Press, 2011).


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literature.13 Chase et al. consider the main divide within the literature on regional trade and

dispute settlement to be between a very small body of literature that examines the design and

function of RTAs in relation to the WTO and a relatively larger body that focuses on

jurisdictional conflict, both real and hypothetical.14 This literature tends to focus on very

specific issue areas, usually with close readings and conjectural interpretations of theagreements themselves.

In an attempt to create a broader generalization about the emerging literature on RTAs,

Gomez-Mera and Molinari note that international relations literature tends to focus on the

sources and consequences of the legalization of dispute settlement, while international law

scholarship tents to focus upon potential conflicts that emerge from the overlap between

regional and multilateral processes.15 Both bodies of literature have been somewhat slow to

consider the many ways that RTAs engage with the changing body of international economic

law.

Following upon these recent attempts to draw some larger taxonomic significance from

the available literature, this paper examines an emerging cleavage in the literature between the

scholarship that deals with design, function, and the legal implications of RTA dispute

settlement, and another, more multidisciplinary body of literature that attempts to conceptualize

the changes underway in the global trading system, as they relate to the new juridical processes

for dispute settlement. 16 Clearly these bodies of literature overlap with literature on

jurisdictional conflict, but this contextualization offers a more systematic attempt to think

through the political implications of large scale changes.17 As such I will summarize the legal

thought in order to provide context, and engage with a number of conceptual approaches tomapping the evolving terrain of law.18

2.1. Literature on the design, function and legal implications of Regional DSMs

Legal literature approaches the issues of dispute settlement through a broadly functionalist lens,

dealing most prominently with the empirical dimension of regional dispute settlement and a

number of hypothetical legal scenarios, which examine the potential conflicts between regional

and multilateral rules in more detail. Frequently using the WTO's legal parameters as an

organizing frame, this literature tends to locate its critique of regionalism within the three

criteria contained in GATT Article XXIV that are required for regionalism to translate into

effective liberalization at the multilateral level. The basic goal of regional integration is to build

upon the concessions offered through the multilateral system, and then in turn extend regional

preferential concessions to the MFN level over time. Although in practice regional concessions

13 J. Chauffour & J. Maur, ‘Preferential Trade Agreement Policies for Development: A Handbook,’ World Bank (2011) http://siteresources.worldbank.org/INTRANETTRADE/Resources/Contents.pdf, accessed 1 May 2014.14 See supra note 1.15 See supra note 10.16 Henry S. Gao & C. L. Lim, ‘Saving the WTO from the Risk of Irrelevance: The WTO Dispute SettlementMechanism as a 'Common Good' for RTA Disputes’, Journal of International Economic Law, 2008, 11: 899-925.

17 William J. Davey & John H. Jackson (eds.), The Future of International Economic Law (Oxford University Press,2008).18 Martti Koskenniemi, The Politics of International Law (Hart Publishing, 2011).


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are seldom generalized through the multilateral system.19

Crawford and Fiorentino were among the first to begin to examine in detail the significant

data collected at the WTO regarding RTA proliferation. This work includes an interesting note

on former Soviet states. Post-Cold War attempts to revive economic links from the soviet

period, in particular through FTAs among the Commonwealth of Independent States, have not

been a great success, and so in an attempt to build upon the CIS institutional frame, a number

of bilateral deals have been struck with the goal of deeper economic integration. 20 This

seemingly small insight into post-Cold War economic integration is a significant piece of the

regionalization puzzle, as I will show below.

Building upon this empirical overview, Marceau and Wyatt Consider the overlap

between RTAs and the WTO system in terms of flexibilities offered by the WTO for the

deployment of retaliatory countermeasures in disputes covered by an RTA. They attempt to

determine the framework required to decide ‘whether RTA trade countermeasures that led to

trade restrictions can nevertheless be justified in the WTO system’.21 Ultimately, they suggest

a three-part test that examines the compatibility of the RTA with Article XXIV, its legitimacy

with WTO membership, and the conformity of the countermeasure with the stated aims of

Article XXIV - the encouragement of regional integration that does not undermine the rights of

WTO members. Using a similar approach to the problem of jurisdiction, Hammond argues that

WTO and RTAs ought to share responsibilities, with RTAs agreeing to refer all disputes to the

WTO and the WTO basically leaving the expansion of trade law to the regional level.22

In what is perhaps the most significant empirical study of dispute settlement

arrangements in RTAs, Chase et al develop a typology of regional dispute settlement and

examine a number of emerging trends.23 They highlight the central paradox that is the subject

of this paper, namely that an increase in RTA DSMs does not correspond with a significant rise

in state-to-state panels in these regional fora. Most regional DSMs use a structure similar to the

WTO, with consultations, third party adjudication and panel implementation phases. Overall,

however, RTAs exhibit a lower level of institutionalization than the WTO processes. Some

require more transparency than the WTO's DSU, and some contain some remedies not available

at the WTO. In an aside they ask, why do states negotiate RTA-DSMs? They begin to answer

the question by suggesting that the replication of WTO dispute settlement commitments at the

regional level may be an attempt to recreate the stability of the DSU in the service of regional

commitments that extend (WTO-plus) or add to (WTO-extra - competition and investment for

example) multilateral disciplines. Secondarily, these agreements may also provide a way to

generally increase enforcement capacity, adding an extra level of deterrence.

19 Jo-Ann Crawford & Roberto V. Fiorentino, ‘The Changing Landscape of Regional Trade Agreements,’ WTO Discussion Papers (World Trade Organization, 2005), pp. 26-7.20 See supra note 19 at p. 20.21 Gabrielle Marceau & Julian Wyatt, ‘Dispute Settlement Regimes Intermingled: Regional Trade Agreements andthe WTO’, Journal of International Dispute Settlement , 2010, 1: 67-95. In particular consult pp. 93-4.

22 Felicity Hammond, ‘A Balancing Act: Using WTO Dispute Settlement to Resolve Regional Trade AgreementDisputes’, Trade, Law and Development , 2012, 4: 421-50.23 See supra note 1.


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In the construction of a comprehensive taxonomy of RTA DSMs, Chase et al build upon

Smith,24 who created a five category taxonomy, Jo and Namgung,25 and Porges,26 bringing

together these previous studies in order to create three basic categories of DSM - political

diplomatic, quasi-judicial model and judicial model.27 This may be the definitive comparison

of regional trade court systems and as such, it focuses upon the specific processes of disputesettlement as they relate to the comparative development of international economic law.

Interestingly, the writers suggest that less developed DSMs may signal the importance of policy

autonomy for regional signatories, a conclusion that is not fully supported by the evidence. The

empirical research below suggests that a commitment to diplomatic solutions to trading

frictions signals a different type of approach to trading order in which a regional hegemon

remain unencumbered by independent judicial inquiry.28

Aside from the question of comparative function, a number of legal scholars have begun

to question the basic divide between global and regional trade governance, noting that due to

the slow progress on WTO negotiations, these two forms of interdependence may be considered

different means to the same end.29 Even so, in one of the more important case studies of trade

regionalism, Davey looks at the relevance of NAFTA for Asia and concludes that the economic

benefits of negotiating FTAs are quite limited, complex rules of origin should be avoided, the

initial simplicity of negotiating agreements with a limited number of partners is likely to be

outweighed in the future by the complexity of managing complex networks of RTAs, and

attention ought to be paid to creating robust DSMs, because without them, the limited benefits

of RTAs may not be realized.30

2.2. Recent Literature on the Conceptualization of Trade Regionalization

Beyond the literature on the institutional development of regional DSMs lies the literature that

attempts to grapple with the challenges involved in conceptualizing the proliferation of RTAs,

and in assessing their impact upon the growing field of international economic law. To be more

specific, this body of literature develops a number of conceptual tools for analysing varieties of

governance and charting trends in the development of agreements over time. Most research in

this epistemic community has moved beyond the spaghetti bowl metaphor (and Bhagwati's

24 J. Smith, ‘The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts’, International

Organization, 2000, 54(1): 137-80.25 See supra note 9.26 Amelia Porges, ‘Dispute Settlement in Preferential Trade Agreement Policies for Development: A Handbook,’2011, World Bank, https://http://siteresources.worldbank.org/INTRANETTRADE/Resources/PTAch22.pdf.27 Focus on automaticity of judicial access and suggest that the difference between categories 2 and 3 is one ofdegree of permanence. This is a useful way to divide a typology of this nature, although I divide the categories

between DSMs located outside the agreement, and those fully articulated inside the agreement. I suggest a qualitativedifference between those that contain stand-alone DSMs and those that outsource DS to another body.28 Eric Voeten, ‘International Judicial Independence,’ in Jeffrey L. Dunoff & Mark A. Pollack (eds.), Interdisciplinary Perspectives on International Law and International Relations: The State of the Art (CambridgeUniversity Press, 2013).29 Sayantan Gupta, ‘Changing Faces of International Trade: Multilateralism to Regionalism’, Journal of

International Commercial Law and Technology, 2008, 3: 260-73.30 William J. Davey, ‘Evaluating WTO Dispute Settlement: What Results Have Been Achieved through

Consultations and Implementation of Panel Reports?’ Social Science Research Network eLibrary (2005) http://ssrn.com/paper=863865 accessed February 18, 2014.


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well-publicized concerns about the disintegration of governance consensus) to an examination

of the changing institutional processes underway at the regional level.31

Abbott's study of the legalization of world politics approaches the regionalization

dynamic through the analytic lens of the North American Free Trade Agreement.32 He argues

that regionalization thrives due to a preference for hard over soft law in global governance.

Hard law, by which he means the law of treaties and contractual obligations, is often preferable

way to manage the politics of interdependence because it ‘reduces intergovernmental

transaction costs associated with trade and investment,’ this is particularly the case for partners

with high trade volumes, but it turned out to be a prescient point, as hard law spawned a robust

network of agreements over the next decade.33

Hard law ‘reduces private risk premiums associated with trade and investment,’ and

promotes transparency while simultaneously restraining strategic political behaviour. 34

NAFTA has proven to be a significant factor in maintaining the North American economiccommunity. Even so, Abbott's final point, that baking contractual obligation into regional

integration ‘may increase the range of integration effects by encouraging private actions to

enforce intergovernmental obligations,’ remains prescient, and somewhat controversial,

especially in light of the economic pressures placed upon North American private sector by the

financial crisis.35

In a useful update to Abbott's discussion of the hard law of global governance,

Subramanian and Kessler note that regional agreements are central to the hyperglobalization of

trade.36 This hyperglobalization phenomenon is driven by rising trade volumes, integration at

the regional and multilateral levels, and a new emphasis on deep integration that delves into

behind the border regulatory issues. All WTO members except Mongolia are part of RTAs.

Half the exports of the top 30 exporters go to preferential trade partners. The biggest issue is

the development of what they call ‘mega-regional agreements,’ such as the Trans-Pacific

Partnership, and the Trans-Atlantic Trade and Investment Partnership, which link the US with

other regions outside the Western Hemisphere. Trade agreements between North America and

Asia may increase trade volumes significantly, a conclusion increasingly challenged by

scholars studying the economic benefits of RTAs.37

Drahos calls the proliferation of DSMs in RTAs a 'bilateral web' that knits large traderssuch as the US with smaller economies through an institutionalized set of relations that are

inherently unequal. Strong states use a variety of negotiating tactics, legal mechanisms and

31 Jagdish Bhagwati, Termites in the Trading System: How Preferential Agreements Undermine Free Trade (OxfordUniversity Press, 2008).32 Frederick M. Abbott, ‘NAFTA and the Legalization of World Politics: A Case Study’, InternationalOrganization, 2000, 54: 519-47.33 Ibid., at p. 52034 Ibid. 35 Ibid. 36 Arvind Subramanian & Martin Kessler, ‘The Hyperglobalization of Trade and Its Future,’ Peterson Institute for

International Economics (2013) www.iie.com/publications/wp/wp13-6.pdf accessed February 21, 2014.37 William J. Davey, ‘R egional Trade Agreements and the WTO: General Observations and NAFTA Lessons for

Asia’, International Economic Law, 2004, 13: 142-75.


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political strategies to maintain their interests vis-a-vis smaller economies. In particular, Drahos

suggests that choice-of-forum clauses allow strong states (as complainants) to shift dispute

settlement out of the WTO system.38 Of course in the context of the study below, it is not clear

if forum shopping actually happens, or if pursuing secondary judicial options would even be a

preferable strategy for large traders.

In strategic terms, it might behove a smaller state to take a strong case to the WTO

because it is a higher profile institution and enjoys a large degree of political legitimacy.

Likewise, a larger trading partner might have an interest in taking a relatively weaker case to a

regional body. Much of the research assumes a complex calculation that goes into choice of

forum, although at this point it is largely a theoretical discussion. Noting the changing dynamics

of political power that accompany trade regionalism, Gao and Lim suggest that the best way to

increase the WTO's relevance in the face of increasing regionalism is to use the WTO to develop

a model RTA template and to strengthen oversight of the WTO-RTA transparency

mechanism.39 Such a process would certainly strengthen WTO oversight of RTAs, but given

the significant growth that has already occurred in regional agreements, it is not clear that there

are a great many more agreements to negotiate.

In an attempt to come to grips with this significant shift in the locus of governance,

Slaughter is primarily interested in the conceptual shift what occurred in the 1990s as arbitral

forms of dispute settlement moved out of the specialized world of national courts, and into the

GATT, the ICSID, RTAs and other new judicial systems. She marks this as a conceptual shift

from two systems (national and international) to one system in which judges apply international

law, national law, or a mix of both.40 She calls this blurring of boundaries between domestic

law and treaty obligation the birth of a global community of courts. Through this global

commons, judges become part of a single epistemic community that no longer operates within

the bounds of nation states. Slaughter is not the first to note the changing relations between

courts, but her concept of a community of courts raises the possibility of considering an

increasing formalization of the relations between national courts, international arbitral

mechanisms and RTAs that have populated the trading system.

This is such a new process, and our conceptual tools for describing it are so

underdeveloped, that Berman suggests that the process described above has strained the concept

of international law and requires a new multidisciplinary treatment that expands the conceptual

frame of legal studies.41 This research on the emergence of multi-level, and indeed global, legal

influence suggests that there is something to the idea of increasingly formal relations between

the WTO DSB and RTA dispute settlement.42 At this point some of that relationship is written

into RTAs in the form of forum exclusion clauses and other articles that limit the recourse to

38 See supra note 3 at p. 192.39 See supra note 16.40 See supra note 3.41 Berman, Paul Schiff, ‘From International Law to Law and Globalization’, Columbia Journal of Transnational

Law, 2005, 43: 485-555.42 Sungjoon Cho, ‘Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade

Regionalism’, Harvard International Law Journal , 2001, 42: 419-66.


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certain mechanisms.

Much of this research is related to the constitutionalization debate because it deals with

relations between legal systems, but the community of courts hypothesis is interesting because

it eschews of the hierarchical terms of constitutionalism and suggests a more networked

approach to understanding the relationships between legal systems. 43 It focuses on the

practicalities of legal interdependence, examining the changing nature of political discourse as

it takes place both inside and outside changing juridical institutions.

Drezner is primarily concerned with the political implications of the proliferation of

governance institutions. He argues that ‘institutional proliferation erodes the causal pathways

through which regimes ostensibly strengthen international cooperation’.44 The proliferation of

regimes and subsequent forum shopping shifts governance from rules based to power based

outcomes. Drezner suggests four reasons for scepticism about the benefits for governance of

the proliferation of rules-based systems. First, proliferation dilutes the power of prior focal

points. Second, ‘nested and overlapping governance arrangements makes it more difficult to

detect defections from existing regimes’.45 Third, conflicting legal mandates may weaken legal

obligations over time. Fourth, increased complexity of governance places a disproportionate

strain on small economies. Each of these outcomes benefits great powers that have the resources

to use the proliferation of institutions for power-based outcomes.

This institutional viscosity thesis, which emphasizes defection and the erosion of

pathways of institutional causality suggests that great powers will use RTAs as a back door

through which to channel state power along pathways that better suit their interests. In many

ways this thesis runs counter to the conventional wisdom which has assumed that great powers prefer a political order from which they provide leadership and lesser powers follow in order

to maintain the contours of a system of predictable rules and outcomes.46 For the institutional

viscosity hypothesis to hold in the context of the growth of RTAs, we would need to see a

significant use of RTA dispute settlement as dominant regional partners attempt to escape the

straight-jacket of WTO trade discipline through the development of regional governance blocs

better suited to their interests. As the research below shows, this has not been the case. Although

the larger question of institutional viscosity in other contexts remains open, it appears that in

the trading system, most countries still prefer a centralized, binding and multilateral mechanism

for dispute settlement.

3. VARIETIES OF DISPUTE SETTLEMENT MECHANISMS

This study reconsiders the typing of RTAs, as it has been developed in Smith, Jo and Namgung,

43 Cass, Deborah Z., The Constitutionalization of the World Trade Organization: Legitimacy, Democracy and

Community in the International Trading System (Oxford University Press, 2005).44 See supra note 3 at pp. 280-310.45 Ibid.

46 Sylvia Ostry, ‘Who Rules the Future? The Crisis of Governance and Prospects for Global Civil Society,’ NewGeographies of Dissent: Global Counter-Publics and Spheres of Power Conference, York University (2006) www.

robarts.yorku.ca.


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Porges , and Chase et al.47 As the literature review above showed, a number of studies have

highlighted the 'variations on a theme,' that is dispute settlement at the regional level. This study

attempts to come to terms with the extent to which the similarities between the WTO DSM and

regional dispute settlement are related to the institutionalization processes at the multilateral

level. Using the WTO's Dispute Settlement Understanding as an independent variable, Icompare the mechanisms articulated in RTAs in order to get some sense of the extent to which

Members are indeed 'reinventing the wheel' when they negotiate regional dispute processes.

Using this typology, I then conduct a time-sequence study in order to determine A) when

different types of DSM become significant, and B) the outer limits of this dynamic. While most

of the literature tends to divide the history of RTA development into pre and post-WTO eras,

this study examines post-war liberalization in terms of four distinct eras, the most significant

of which is the post Uruguay Round, pre-Doha Round period of 1995-2001, and the troubled

decade of the Doha Round, between launch and the Bali Ministerial Declaration, which offers

a natural punctuation mark at the end of 2013.

A total of 261 active RTAs had been notified to the WTO as of November 2013. In cases

where the same parties signed separate agreements covering goods and services, I treated them

as a single entity to avoid double counting. I then referenced the dispute settlement provisions

from the agreement covering goods in order to get the clearest comparative view of dispute

settlement that covers the largest volume of trade. The typology is designed to compare

institutional convergence and as such answers a question posed by the other lit, why do

countries spend significant resources reinventing the wheel? This research suggests they do not.

Rather they copy an existing template that already enjoys significant legitimacy.

The typology consists of four categories. Category A contains WTO Members who have

signed RTAs that do not contain negotiated DSMs. No provisions for dispute settlement are

mentioned in the text of the agreement. There are couple different sorts of agreements in this

category. The first are EU enlargement agreements that do not contain DS provisions, with the

expectation that members have access to other provisions. The rest are agreements with no

mechanism for dispute settlement. Category B contains those agreements that are closest to a

purely political dispute settlement process. In these agreements, parties agree to consultation

only, without any recourse to a judicial mechanism.

Category C includes agreements with basic arbitral provisions. Parties agree to basic

provisions for arbitration tribunals, which may include referral to a permanent joint committee

or to an external judicial mechanism. In the case of internally organized arbitration there are

few negotiated rules beyond a formula for panel composition and a general agreement to abide

by the arbitrated decision. The DSM may also include a forum shopping clause. It is important

to note that Category C is not necessarily a lesser form of dispute settlement. The agreements

may include referral to an external mechanism that handles such disputes in the broader context

of regional integration, such as the EU’s system at the Stabilization and Association Council

Category D agreements include a fully articulated DSM, which includes features such as

47 See supra notes 1, 9, 24 and 26.


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a timelines for dispute resolution, rules for panel composition, a specified channel for

diplomatic/legal communication, rules for implementation of decisions, forum exclusion

clauses, and/or a forum shopping clause. These agreements may also include investor-state DS

provisions and/or separate DS provisions for specific articles, such as the Chapter 19

antidumping and countervailing duty review provisions in the North American Free TradeAgreement. The chart below shows a basic comparison of the WTO dispute settlement process

with the dispute process drawn from an illustrative treaty, the Korea-Singapore Free Trade

Agreement (KSFTA).48 Both processes feature a high degree of automaticity - the extent to

which juridical systems are driven by procedural rules, routinized processes and automatic

adoption of reports.

Figure 1: Dispute Settlement at the WTO and in Category D RTAs

The key difference between Category C and D agreements is the extent of development

of the dispute mechanisms contained within the agreement itself. So some Category C

agreements may have a less developed process for DS, but others may not if they have a well-

developed set of procedures that were subsequently developed at the joint committee, or if they

contract out to a regional court. Even so, a well-articulated DSM may suggest both fluency with

intergovernmental commercial arbitration processes and a political will to develop

comprehensive mechanisms.49 Figure 2 below shows the distribution of dispute settlement

provisions within regional trade agreements. A complete table of the taxonomic breakdown of

RTAs notified to the WTO is contained in Annex 1.

48 Korea-Singapore Free Trade Agreement (adopted 4 August 2005, entered into force 2 March 2006)49 Gregory C. Shaffer , ‘Developing Country Use of the WTO Dispute Settlement System: Why It Matters, the

Barriers Posed’, in James Hartigan (ed.), Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment (Elsevier, 2009).


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of Independent States.52

Source: WTO RTAIS

52 Of the five remaining, the most significant is ANZCERTA (Australia-New Zealand) signed in 1984, followed byFaroe Islands-Norway (1993), Melanesian Spearhead Group (1994), South Asian Preferential Trade Arrangement

(SAPTA, 1995) and Turkey-Albania (2008).

Figure 3: The Development of Regional Dispute Settlement Mechanisms

Time Series, by Type 1947-2013

Time Series, by Type, 1995-2001

Time Series, by Type 2002-2013

020406080

100120

A - No DSM

B - Consultations only

C - Basic Provisions

D - Full DSM

0

1

2

3

4

5

6

7

1995 1996 1997 1998 1999 2000 2001

A - No DSM



D - Full DSM

0

5

10

15

20

A - No DSM



D - Full DSM


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For a significant majority of these agreements, we may term this a 'post-Soviet' approach

to trade-policy making. Far from suggesting that the political model signals the importance of

policy autonomy for signatories, it is more likely that it telegraphs a different sort of political

decision making, one that is decidedly uncomfortable with an independent role for judicial

actors. Importantly all of these agreements were signed during the decade following the end ofthe Cold War as Russia attempted to articulate a proto-liberal, post-Soviet template for the

continued political-economic control of Eastern Europe.

The third chart in Figure 3 above shows another trend of great interests in this period, the

rise and decline of the regional trade agreement containing a fully-articulated set of dispute

settlement procedures. The trend for RTAs with fully articulated DSMs peaks during years of

greatest uncertainty over the Doha Round, with 18 agreements coming online in 2009 at the

height of the global financial crisis. Considering the significant numbers of agreements already

signed, and the fact that only six RTAs in Category D came online in 2013, it is entirely possible

that we are already past the busiest years of this form of regional integration.

We may consider these to be first generation regional agreements, linking interested

partners with the goal of increasing trade flows within regions. The next frontier, of

regionalization is already upon us, the so-called era of Mega-regional trade agreements that

attempt to generate linkages between regions. Already these agreements are competing with a

partially revived multilateral liberalization process, and like previous attempts at mega-

regionalism, they are likely to encounter many of the same problems faced by multilateral trade

liberalization - increasing technical complexity, uncertain economic gains and indecisive

politicians who are unable to sustain focus or spend large amounts of political capital on the

time-consuming negotiating process.53

Moving on from our discussion of the dynamics of DSM development, we must turn to

the issue of how these proliferating court systems are used. Most disputes brought to NAFTA

are Chapter 11 investor-state cases and Chapter 19 cases which offer an alternative to domestic

judicial review of antidumping and countervailing duty cases. Chapter 19 allows panels to

review an investigating authority's decision involving antidumping and countervailing duty

determinations. Only three chapter 20 cases - that is state-to-state disputes regarding the

interpretation or application of the NAFTA as Figure 4 shows. 54 In comparison, 17 cases

involving the NAFTA partners came through the panel process at the WTO in the same periodas Figure 5 shows.

53 Jorge C. Castaneda, ‘NAFTA’s Mixed Record: The View fr om Mexico’, Foreign Affairs, 2014, 93.54 Much of the activity in NAFTA dispute settlement occurs under the Chapter 19 provisions for binational reviewof antidumping and countervailing duty determinations. As of the end of 2013, 59 such reviews have been completed,

and another 73 have been brought to the Chapter 19 – Article 1904 mechanism and subsequently terminated. This isnot strictly the litigation of trade policy and practice that contravenes treaty obligations, per se. Rather it is a novel

regional approach to smoothing the frictions associated with AD/CV determinations made by national authorities.


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Figure 4: State to State Dispute Settlement - Completed Panels

Figure 5: Comparison of Dispute Panels by Regional Trading Bloc

In the centralization dynamic by which dispute settlement increasingly occurs at the

WTO, Mercosur disputes are very likely the exception that demonstrates the rule. Of the five

partners, (Argentina, Brazil, Paraguay, Uruguay and Venezuela), only two, Argentina and

Brazil are active users of the WTO system. Argentina has initiated 20 complaints and

participated as complainant or respondent in eight completed panels. Similarly, Brazil initiated

27 complaints and has appeared as complainant or respondent in eight completed panels.

However, Venezuela has only participated in one panel process, and Uruguay has launched just

one request for consultations. Paraguay has not participated in dispute settlement at all.

The Mercosur dynamic is fuelled by Brazil and Argentina's trade frictions. Dispute

settlement is broadly related to trade flows which accounts for most of what we see with Brazil

and Argentina. Both trade a great deal more with Europe and North America than they do inside

Mercosur, and dispute settlement patterns reflect that. The Mercosur partnership has been an

attempt to use regional governance organization to overcome a traditionally conflictual

dynamic and create a more cohesive regional marketplace. To a great extent this has not

happened, even though dispute settlement in this agreement bucks the trend under discussion,

to a limited extent.

181

103 0

0

20

40

60

80

100

120

140

160

180

200

WTO Mercosur NAFTA ASEAN

17

3

1

10

0

2

4

6

8

10

12

14

16

18

WTO NAFTA WTO Mercosur

NAFTA Partners Mercosur Partners


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Commenting on the larger picture of regional dispute settlement, Chase et al has shown

that only one case has been brought to an RTA to which the US is a party - an American request

for consultations with Guatemala regarding labour legislation. In addition to the Mercosur cases

discussed above, in Latin America there have been four CARICOM disputes, and four initiated

under ALADI. There have been no disputes initiated under RTAs signed by the EU, none underASEAN, and none initiated by any other WTO members.55

4. R ESOLVING THE PARADOX OF DISPUTE SETTLEMENT

This dynamic of DSM proliferation alongside an intensification of centralized dispute

settlement at the WTO suggests that we need to reconsider the some of the basic ways we

conceptualize the integration/fragmentation narrative, in which RTAs serve as evidence that

states are increasingly disenchanted with multilateral approaches to trade governance. To that

end, this final section returns to a number of conceptual touchstones - the nascent community

of courts, the growing global web of bilateralism, and the impact of institutional proliferation

on pathways of global governance.

The community of courts hypothesis argues for an increasing articulation of judicial

precedent across jurisdictions as fewer distinctions are made between national law and

international law. If this is the case, we would expect to see less distinction made in where a

case is decided, and perhaps the use of judicial decisions from one trade court, rearticulated in

another forum. In short, dispute settlement would be situated across the spectrum of national,

regional and multilateral forums. This might be the case in the future, but it seems for the time

being that the network of global governance is one in which RTAs are relatively passive in themaking of judicial precedent. We could say that in terms of conceptualizing a global community

of trade courts, the network metaphor, while apt in some contexts, begins to break down upon

closer inspection.

The multilateral conception, on the other hand, of a central governance institution with

the institutional authority and political legitimacy to settle disputes, remains persuasive. With

so few cases going to RTAs, it appears that when a member really needs a dispute resolved, the

WTO is the forum of choice. I had suggested earlier in the paper that there might be a rationale

to be made for pursuing a case at a regional forum, but the contextual frame in which regional

dispute settlement makes strategic sense remains a counterfactual, at least in case of state-to-

state dispute settlement. This is not to say that the community of courts hypothesis is entirely

unpersuasive. On a number of fronts, from investor-state arbitration to anti-dumping and

countervail review, regional trade bodies such as NAFTA and the ICSID are playing a larger

role in the regulation of trade.56

Drahos has written persuasively on the role that political and economic power play in the

development of trade governance, arguing most recently that the rise of regionalism places

55 See supra note 1, at pp. 46-7.56 Mathias M. Francke, ‘Chile's Participation in the Dispute Settlement System: Impact on Capacity Building’,

Social Science Research Network eLibrary (2008) http://ssrn.com/paper=1159942 accessed 24 February 2014.

http://ssrn.com/paper=1159942http://ssrn.com/paper=1159942


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smaller economies in a subordinate position, in which large traders would use their political

clout to push dispute settlement at fora that suited their interests.57 Drahos has particularly

concerned that in RTAs, away from the spotlight of WTO review, the strong would dominate

the weak. This argument, like Slaughter's above, is persuasive as counterfactual, but must wait

for more evidence for empirical testing. At this point perhaps we can say that the web of bilateralism argument ignores one very salient point - dispute settlement is initiated by a

complainant, who is only likely to initiate a review of a competitor's national policies that they

think they can win, and enforce.

If governments are going to participate in state-to-state dispute settlement, in which

compliance is never fully assured, most choose to do so in the forum from which they are more

likely assured a high degree of compliance. In strictly functionalist terms, it appears that large

economies have significant incentive to take strong cases to the WTO, as do smaller economies.

This is not to say that RTAs will not figure in strategic trade policy considerations in the future.

And certainly Drahos’s overall contention that RTAs are stacked in favour of the stronger

economy, at least in terms of their overall negotiated shape and the rules they favour, continues

to be relevant to the larger discussion of trade regionalization. But when it comes to dispute

settlement, it appears that complainants prefer the WTO over regional mechanisms for a variety

of reasons, not least of which is its high degree of legitimacy, which is entirely necessary when

the weak bargain with the strong.58

Drezner claims that proliferation of institutions dilutes the power of prior focal points. In

this case, however, despite the proliferation of regional DSMs, the WTO’s DSM continues to

be the main focal point of dispute settlement. 59 His second claim is that overlapping

governance institutions make it easier for states to defect from existing regimes by forum

shopping. In this case, defection can easily be measured in cases going to different fora, which

is not happening. But even if it did happen, if the judicial forum was not substantially different,

or less rigorous than the WTO, it is not clear what that defection would accomplish. Certainly

if we were seeing the rise of regional DSMs that clearly benefitted the larger economy in the

agreement and a rise in subsequent cases coming to that forum, we could make a case for

defection, but that does not seem to be the case. If anything, the opposite seems to hold true. At

least in the case of NAFTA, more cases have come to the WTO concerning trade irritants

between the NAFTA partners, than have been heard at the regional forum, as I showed above.

The third claim is that conflicting legal mandates may weaken legal obligations over

time, and this is also the concern of many legal scholars who are looking for the compatibility

57 Peter Drahos, ‘When the Weak Bargain with the Strong: Negotiations in the World Trade Organization’, International Negotiation, 2003, 8: 79-109.58 Andrew F. Cooper, Internet Gambling Offshore: Caribbean Struggles over Casino Capitalism (PalgraveMacMillan, 2011).59 Aside from the institutional viscosity hypothesis discussed above, the dangers associated with the proliferation of

DSMs come from two directions – one is similar to Bhagwati’s termites in the trading system metaphor. The second

is the danger of proliferating ‘paper tiger’ RTAs, which may lock countries into agreements with DSMs that fall far below the WTO’s standard for dispute settlement. This is primarily the issue in trade agreements between ex-soviet

states. See David A. Lynch, Trade and Globalization: An Introduction to Regional Trade Agreements (Rowman andLittlefield, 2010).


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between the WTO and RTAs in an attempt to reconcile these forms of governance and reduce

the friction between them. There is no way to know whether the proliferation of RTAs will

weaken WTO obligations over time, but there is some evidence to suggest that RTAs have been

a vehicle for WTO-plus and WTO-extra commitments, making it unclear whether they provide

an alternative to the WTO system or an addition to that system. At least in the realm of disputesettlement, the evidence seems to be weighted in favour of conceptualizing RTAs as an addition

to the system rather than a weaker alternative.

The fourth claim is that the financial costs of the increasing complexity of global

governance places smaller countries at a disadvantage vis-à-vis the world’s wealthiest

economies. Certainly, as the literature on legal capacity has shown, the costs of complexity are

more easily born by large economies.60 However, at this point it is not clear if these regional

DSMs are truly costly for the countries involved. Much of their current form is based on the

WTO system, so while there is certainly a cost for negotiating these instruments, they reflect a

common template, and are therefore not reinventing the wheel. Secondly, much of the work

that they do is not undertaken by the WTO, such as investor-state dispute settlement, or

countervail review, so the costs may be rationalized. And in the case of state-to-state dispute

settlement, because they are seldom used, they seem to be a form of reinsurance rather than a

separate legal forum that requires significant resources for its maintenance. Chase et al have

examined a number of what they call full judicial mechanisms, and find that very few have

standing judiciaries and fully articulated institutions for dispute settlement. Most fall into the

category that they term quasi-judicial institutions, with mechanisms that can be brought online

as the need arises.

All this suggests that the proliferation of regional DSMs cannot be considered to be part

and parcel with the development of a full-voiced epistemic community. Nor can the dynamic

be considered a deep thicket of bilateralism or a proliferation of legal rabbit holes through which

large traders may access their political powers of coercion. Perhaps the best metaphor for the

current proliferation of RTA DSMs is that of reinsurance - a way to securitize risk. If anything

large traders may use RTAs and multiple DSMs to insure regional liberalization against the

failure of multilateralism, while investing heavily in the WTO system because it is the most

legitimate and best institutionally developed system of dispute settlement. Conventional

wisdom in the world of finance has it that risk securitization promotes market liquidity. Perhaps

the securitization of dispute settlement through the development of regional DSMs may free up

states to invest in multilateral dispute settlement with confidence that the risks of a self-help

system such as compliance, are at least partly covered by a regional backstop.

The reinsurance hypothesis suggests that there are three main reasons that a state that is

already heavily invested in the WTO system may wish to invest in DSMs in RTAs.

A. DSMs are a statement of confidence in the RTA itself. RTAs could contain

clauses that refer all dispute settlement to the WTO, and certainly some contain

60 Marc L. Busch, Eric Reinhardt & Gregory C. Shaffer, ‘Does Legal Capacity Matter? A Survey of WTOMembers’, World Trade Review, 2009, 8(4): 559-77.


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exclusion clauses, but the dynamic has been to show confidence in regional mechanism

by blessing it with the endowments of the WTO. In this way, regional partners show

confidence in the agreement by endowing it with the best features of the multilateral

system, while simultaneously securitizing their most important trading relationships

with an extra dispute settlement mechanism that acts as a hedge against systemic risk.Chase et al wonder if this is because regional dispute mechanisms may serve as an extra

layer of deterrence.61 It is not clear whether regional mechanisms serve any clear

deterrence function, but it is clear that all WTO members who use the DSM maintain

at least one (and in most cases numerous) memberships in RTAs with complimentary

dispute mechanisms.

B. It is a straightforward way to protect WTO-plus and WTO-extra disciplines.

Certainly these mechanisms cover negotiated agreements that go beyond what has been

negotiated at the WTO (WTO-extra and WTO-plus agreements). But the fact that

almost all dispute settlement continues to go through the WTO suggests that the

regional mechanisms exist primarily as a way to express confidence in the durability

of the new agreement, and secondarily to protect against the potentiality of conflict in

areas of WTO-plus/extra trade governance.

C. It is a constructive commitment to the principle of judicial independence. Every

new RTA is known to be a serious attempt at regional integration because it contains a

fully articulated DSM. In fact the lack of DSM seems to be suggestive of power-based

outcomes in a way that others do not. The evidence above suggests that the lack of a

DSM is not the reflection of a preference for flexible diplomatic approaches to dispute

settlement so much as it is, to a great extent, a reflection of a basic mistrust of an

independent judiciary. Put another way, an agreement lacking a DSM validates the

suspicion that an independent mechanism is impossible within the particular historical

institutional context of regional trade relations.

The preceding study suggests that regional DSMs are a political statement about the

importance of secure relations in the context of system insecurity. In this way, the study may

be situated within an emerging vein of scholarship that examines the dynamics of plural legal

systems within the larger context of history. For example, in his re-consideration of

globalization and law, Tamanaha suggests that plural legal arrangements are the norm, ratherthan the exception in historical context. 62 In an attempt to move beyond the

integration/fragmentation debate, Fabricotti offers a conceptualization of the relationship

between the WTO and RTAs interplay between two sources of law, the law of custom and the

law of treaty, rather than conflict between overlapping treaties.63 Seen through this lens, the

development of RTAs is part of a long historical process in which the customary law of

61 See supra note 1, at p. 4762 Brian Z. Tamanaha, ‘Understanding Legal Pluralism: Past to Present, Local to Global (Julius Stone Address)’Social Science Research Network eLibrary (2007) http://ssrn.com/abstract=1010105 accessed 23 January 2014.

63 Alberta Fabbricotti, ‘The Interplay between the WTO and RTAs: Is It a Question of Interrelation betweenDifferent Sources of International Law?’ 2008, Society of International Economic Law Online Proceedings, SSRN

eLibrary http://ssrn.com/abstract=1151386 accessed 14 December 2013.


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international trade relations has always included ‘an unwritten right or freedom to prefer ’.64

Regional trade is part of a larger history of trade governance in which custom, culture and

commerce come together in ways that defy the rational expectations of modern global

governance.

If this is indeed the case, that the right to prefer is one that is 'baked in' to current

governance arrangements, it suggests a new significance to the centralization of dispute

settlement. Most of the scholarship on trade multilateralism imagines that nations overcome the

particularism of mercantilist approaches to trade through a multilateral political movement

predicated upon a modern understanding of the theory of comparative advantage. First movers

are important and a stable, economically open hegemon is necessary to provide leadership and

deter free riders.65 Yet it may be that the main driver of trade multilateralism following the first

enthusiastic flush of the so-called peace dividend is a developing consensus about the centrality

of dispute settlement. Liberalization is important, but the biggest deliverable of the Uruguay

Round was a central governance organization with the legitimacy to solve trade disputes.

5. CONCLUDING THOUGHTS

This study began by reconsidering the literature on the development of dispute settlement

mechanisms in regional trade agreements. Most of the scholarship divides the literature

between empirical and theoretical studies, or between studies that emphasize the political and

legal dimensions of international economic law. This paper emphasized the evolving dynamics

of trade dispute settlement by dividing recent research between that which emphasizes the

institutional and legal implications of the judicial process, on the one hand, and that whichattempts to conceptualize the changing face of trade law, on the other. In this way the literature

review attempts to highlight some of the most important literature that bridges the gap between

international law and international relations. It ought to be clear that I highlighted literature that

has been somewhat underappreciated, but which offers substantive and counterintuitive

alternatives to current thinking about the regionalization of trade.

The third section provided an empirical examination of the regional dynamics of dispute

settlement. The main findings were that first, in the development of RTAs, most favour a model

of dispute settlement in which the main provisions of WTO dispute settlement are rearticulated

at the regional level. Second, of those countries that favoured a political/diplomatic model of

dispute settlement most agreements were signed between partners from the former Soviet bloc

and became active in the decade immediately following the end of the Cold War in 1989. Third,

the rise of the fully articulated dispute settlement system in RTAs began around the same time

as the creation of the WTO, and peaked in 2009. The past four years have witnessed a

downward trend in the number of agreements coming online with full dispute settlement

mechanisms. Finally, despite the proliferation of RTAs with fully articulated DSMs, disputes

64 See supra note 63, at p. 165 Robert O. Keohane, Andrew Moravcsik & Anne-Marie Slaughter, ‘Legalized Dispute Resolution: Interstate and

Transnational’, International Organization, 2000, 54(3): 457-88.


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continue to be heard at the WTO. Even in RTAs between partners with intensive trade flows

and potentially intractable trade irritants, disputes tend to go to the WTO, with some Latin

American dispute settlement serving as an exception to this general rule.

The final section returned to the literature highlighted in section two in order to provide

a set of contextual touchstones for the findings above. Given the lack of state-to-state dispute

settlement at RTAs, it is difficult to provide a triangulation of the position of these RTAs in the

global system of arbitration. Ultimately, there is little evidence at this time to validate Drahos'

concerns about the bilateral web of dispute settlement. Furthermore, the proliferation of RTA

dispute settlement mechanisms do not provide much evidence for Slaughter's global community

of courts hypothesis, although there is other compelling evidence, in the form of multilateral

dispute settlement, to make the idea of a networked global court system an important corollary

to the constitutionalism debates. Perhaps the most interesting implications of the empirical

study speak to Drezner’s institutional viscosity hypothesis. 66 Drezner has updated and

increased the theoretical rigour of the arguments against a proliferation of governance

mechanisms first articulated by Bhagwati. 67 However, this paper has shown that the

proliferation of regional DSMs has not diluted the viscosity of dispute settlement at the WTO,

at least not to this point in time.

While the literature does not provide a single compelling rationale for the centralization

of dispute settlement, its gaps suggest an unexplored avenue. The lack of overwhelming

economic and legal arguments for the development of regional dispute settlement processes

leaves us in the political realm of multilateral uncertainty. The paper proposes a reinsurance

hypothesis to explain the proliferation of dispute settlement mechanisms. As the WTO’s

negotiations drifted throughout the first decade of the Doha Round, members turned to regional

mechanisms for the securitization of gains from trade.

Like in the latter half of the 19 th century, when multiple, overlapping treaties among

potential aggressors represented a legalistic approach to the maintenance of the status quo, the

use of regional trade agreements today may represent a layered approach to insuring against the

breakdown of multilateral institutions of trade governance. There are three reasons that states,

which are already heavily involved in WTO dispute settlement, may wish to develop similar

mechanisms at the regional level. First, DSMs are a statement of confidence in the RTA, and

as such act as a hedge against systemic risk. Second, they are a straightforward attempt to protect WTO-extra and WTO-plus agreements. Third they are an expression of confidence in

an approach to dispute settlement that privileges judicial independence.

While Drahos is correct to note the significant differentials in political and economic

power that typify trade relations when the weak bargain with the strong, regional dispute

mechanisms may be a counterintuitive approach to highlighting the increasing importance of

law in the shadow of power. There are, however, complicating factors. The literature on

reinsurance networks points out that reinsurance is not always the most parsimonious approach

66 See supra note 3.67 See supra note 31.


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to securing against systemic risk. It can be expensive, and provide incomplete coverage.

Likewise, the history of 20th century suggests that the likelihood that states will defect from the

status quo increases in a multipolar system with a proliferating array of politically expedient

governance options.

Further research is needed to examine the use of regional DSMs. Two questions will

become increasingly important in the next two decades of dispute settlement. First, does the

existence of an RTA make compliance after dispute settlement at the WTO more likely? A

comparison of compliance in instances where members are also party to a regional agreement

may suggest that there is a fourth key reason that states negotiate RTA dispute processes – to

act as a spur to compliance. The second question may ultimately prove to be more significant,

however. Do forum exclusion clauses and other avenues of dispute settlement in RTAs channel

trade conflict into the WTO system? RTA dispute processes may ultimately serve a hybrid

function – protecting WTO-plus/extra agreements, providing regional regulatory oversight and

channelling state-to-state disputes into the WTO system. It is very likely that future arbitral

dynamics will show that regional DSMs act as a form of reinsurance and in this way resolve

the paradox of dispute settlement.


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Annex 1: RTAs notified to the GATT/WTO and in force (A-Z Table)

RTA Name Coverage TypeDate of

entry into forceDSM Typology

Andean Community (CAN) Goods CU 25-May-88 No A

Armenia - Kazakhstan Goods FTA 25-Dec-01 Yes B

Armenia - Moldova Goods FTA 21-Dec-95 Yes C

Armenia - Russian Federation Goods FTA 25-Mar-93 Yes C

Armenia - Turkmenistan Goods FTA 07-Jul-96 Yes C

Armenia - Ukraine Goods FTA 18-Dec-96 Yes B

ASEAN - Australia - New Zealand Goods & Services

FTA &

EIA 01-Jan-10 Yes D

ASEAN - China Goods & ServicesFTA &EIA 01-Jan-05 Yes D

ASEAN - India Goods FTA 01-Jan-10 Yes D

ASEAN - Japan Goods FTA 01-Dec-08 Yes D

ASEAN - Korea, Republic of Goods & Services

FTA &

EIA 01-Jan-10 Yes D

ASEAN Free Trade Area (AFTA) Goods FTA 28-Jan-92 Yes D

Asia Pacific Trade Agreement (APTA) Goods PSA 17-Jun-76 Yes C

Asia Pacific Trade Agreement (APTA)

- Accession of China Goods PSA 01-Jan-02 Yes C

Australia - Chile Goods & ServicesFTA &EIA 06-Mar-09 Yes D

Australia - New Zealand

(ANZCERTA) Goods & Services

FTA &

EIA 01-Jan-83 Yes BAustralia - Papua New Guinea

(PATCRA) Goods FTA 01-Feb-77 No A

Brunei Darussalam - Japan Goods & Services

FTA &

EIA 31-Jul-08 Yes D

Canada - Chile Goods & ServicesFTA &EIA 05-Jul-97 Yes D

Canada - Colombia Goods & Services

FTA &

EIA 15-Aug-11 Yes D

Canada - Costa Rica Goods FTA 01-Nov-02 Yes D

Canada - Israel Goods FTA 01-Jan-97 Yes D

Canada - Jordan Goods FTA 01-Oct-12 Yes D

Canada - Panama Goods & Services

FTA &

EIA 01-Apr-13 Yes D

Canada - Peru Goods & Services

FTA &

EIA 01-Aug-09 Yes D

Caribbean Community and CommonMarket (CARICOM) Goods & Services CU & EIA 01-Aug-73 Yes C

Central American Common Market(CACM) Goods CU 04-Jun-61 No A

Central European Free Trade

Agreement (CEFTA) 2006 Goods FTA 01-May-07 Yes D

Chile - China Goods & ServicesFTA &EIA 01-Oct-06 Yes D

Chile - Colombia Goods & Services

FTA &

EIA 08-May-09 Yes D

Chile - Costa Rica (Chile - CentralAmerica) Goods & Services FTA &EIA 15-Feb-02 Yes D


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Chile - El Salvador (Chile - CentralAmerica) Goods & Services

FTA &EIA 01-Jun-02 Yes D

Chile - Guatemala (Chile - Central

America) Goods & Services

FTA &

EIA 23-Mar-10 Yes DChile - Honduras (Chile - Central


FTA &

EIA 19-Jul-08 Yes D

Chile - India Goods PSA 17-Aug-07 Yes D

Chile - Japan Goods & Services

FTA &

EIA 03-Sep-07 Yes D

Chile - Malaysia Goods FTA 25-Feb-12 Yes D

Chile - Mexico Goods & Services

FTA &

EIA 01-Aug-99 Yes DChile - Nicaragua (Chile - Central


FTA &

EIA 19-Oct-12 Yes D

China - Costa Rica Goods & ServicesFTA &EIA 01-Aug-11 Yes D

China - Hong Kong, China Goods & Services FTA &EIA 29-Jun-03 Yes C

China - Macao, China Goods & ServicesFTA &EIA 17-Oct-03 Yes C

China - New Zealand Goods & Services

FTA &

EIA 01-Oct-08 Yes D

China - Singapore Goods & ServicesFTA &EIA 01-Jan-09 Yes C

Colombia - Mexico Goods & Services

FTA &

EIA 01-Jan-95 Yes D

Colombia - Northern Triangle (El

Salvador, Guatemala, Honduras) Goods & Services

FTA &

EIA 12-Nov-09 Yes D

Common Economic Zone (CEZ) Goods FTA 20-May-04 Yes B

Common Market for Eastern and

Southern Africa (COMESA) Goods CU 08-Dec-94 Yes CCommonwealth of Independent States(CIS) Goods FTA 30-Dec-94 Yes C

Costa Rica - Mexico Goods & ServicesFTA &EIA 01-Jan-95 Yes D

Costa Rica - Peru Goods & ServicesFTA &EIA 01-Jun-13 Yes D

Costa Rica - Singapore Goods & ServicesFTA &EIA 01-Jul-13 Yes D

Dominican Republic - Central America Goods & ServicesFTA &EIA 04-Oct-01 Yes D

Dominican Republic - Central America- United States Free Trade Agreement

(CAFTA-DR) Goods & Services

FTA &

EIA 01-Mar-06 Yes D

East African Community (EAC) Goods & Services CU & EIA 07-Jul-00 Yes D

East African Community (EAC) -Accession of Burundi and Rwanda Goods CU 01-Jul-07 Yes D

EC (10) Enlargement Goods CU 01-Jan-81 No A


EC (15) Enlargement Goods & Services CU & EIA 01-Jan-95 Yes A

EC (25) Enlargement Goods & Services CU & EIA 01-May-04 Yes A

EC (27) Enlargement Goods & Services CU & EIA 01-Jan-07 Yes A


EC Treaty Goods & Services CU & EIA 01-Jan-58 Yes C


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Economic and Monetary Community ofCentral Africa (CEMAC) Goods CU 24-Jun-99 Yes C

Economic Community of West African

States (ECOWAS) Goods CU 24-Jul-93 Yes C

Economic Cooperation Organization(ECO) Goods PSA 17-Feb-92 Yes C

European Free Trade Association(EFTA) Yes D

EFTA - Accession of Iceland Goods FTA 01-Mar-70 No A

EFTA - Albania Goods FTA 01-Nov-10 Yes D

EFTA - Canada Goods FTA 01-Jul-09 Yes D

EFTA - Chile Goods & ServicesFTA &EIA 01-Dec-04 Yes D

EFTA - Colombia Goods & ServicesFTA &EIA 01-Jul-11 Yes D

EFTA - Egypt Goods FTA 01-Aug-07 Yes D

EFTA - Former Yugoslav Republic ofMacedonia Goods FTA 01-May-02 Yes D

EFTA - Hong Kong, China Goods & ServicesFTA &EIA 01-Oct-12 Yes D

EFTA - Israel Goods FTA 01-Jan-93 Yes D

EFTA - Jordan Goods FTA 01-Sep-02 Yes D

EFTA - Korea, Republic of Goods & ServicesFTA &EIA 01-Sep-06 Yes D

EFTA - Lebanon Goods FTA 01-Jan-07 Yes D

EFTA - Mexico Goods & ServicesFTA &EIA 01-Jul-01 Yes D

EFTA - Montenegro Goods FTA 01-Sep-12 Yes D

EFTA - Morocco Goods FTA 01-Dec-99 Yes D

EFTA - Palestinian Authority Goods FTA 01-Jul-99 Yes D

EFTA - Peru Goods FTA 01-Jul-11 Yes D

EFTA - SACU Goods FTA 01-May-08 Yes D

EFTA - Serbia Goods FTA 01-Oct-10 Yes D

EFTA - Singapore Goods & Services

FTA &

EIA 01-Jan-03 Yes D

EFTA - Tunisia Goods FTA 01-Jun-05 Yes D

EFTA - Turkey Goods FTA 01-Apr-92 No A

EFTA - Ukraine Goods & ServicesFTA &EIA 01-Jun-12 Yes D

Egypt - Turkey Goods FTA 01-Mar-07 Yes C

El Salvador- Honduras and the Separate

Customs Territory of Taiwan, Penghu,Kinmen and Matsu Goods & Services

FTA &EIA 01-Mar-08 Yes D

EU - Albania Goods & Services

FTA &

EIA 01-Dec-06 Yes C

EU - Algeria Goods FTA 01-Sep-05 Yes C

EU - Andorra Goods CU 01-Jul-91 Yes C

EU - Bosnia and Herzegovina Goods FTA 01-Jul-08 Yes D

EU - Cameroon Goods FTA 01-Oct-09 Yes D

EU - CARIFORUM States EPA Goods & ServicesFTA &EIA 01-Nov-08 Yes D

EU - Central America Goods & Services

FTA &

EIA Yes D


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EU - Chile Goods & Services

FTA &

EIA 01-Feb-2003(G) Yes C

EU - Colombia and Peru Goods & ServicesFTA &EIA 01-Mar-13 Yes D

EU - Cote d'Ivoire Goods FTA 01-Jan-09 Yes D

EU - Eastern and Southern AfricaStates Interim EPA Goods FTA 14-May-12 Yes D

EU - Egypt Goods FTA 01-Jun-04 Yes C

EU - Faroe Islands Goods FTA 01-Jan-97 No A

EU - FYRO Macedonia Goods & ServicesFTA &EIA 01-Jun-01 Yes C

EU - Iceland Goods FTA 01-Apr-73 No A

EU - Israel Goods FTA 01-Jun-00 Yes D

EU - Jordan Goods FTA 01-May-02 Yes C

EU - Korea, Republic of Goods & Services

FTA &

EIA 01-Jul-11 Yes D

EU - Lebanon Goods FTA 01-Mar-03 Yes C

EU - Mexico Goods & ServicesFTA &EIA 01-Jul-00 Yes D

EU - Montenegro Goods & ServicesFTA &EIA 01-Jan-08 Yes D

EU - Morocco Goods FTA 01-Mar-00 Yes C

EU - Norway Goods FTA 01-Jul-73 No A

EU - Overseas Countries andTerritories (OCT) Goods FTA 01-Jan-71 Yes C

EU - Palestinian Authority Goods FTA 01-Jul-97 No A

EU - Papua New Guinea / Fiji Goods FTA 20-Dec-09 Yes D

EU - San Marino Goods CU 01-Apr-02 Yes C

EU - Serbia Goods FTA 01-Feb-10 Yes D

EU - South Africa Goods FTA 01-Jan-00 Yes D

EU - Switzerland - Liechtenstein Goods FTA 01-Jan-73 No A

EU - Syria Goods FTA 01-Jul-77 No A

EU - Tunisia Goods FTA 01-Mar-98 Yes C

EU - Turkey Goods CU 01-Jan-96 Yes D

EU (28) Enlargement Goods & Services CU & EIA 01-Jul-13 No AEurasian Economic Community

(EAEC) Goods CU 08-Oct-97 No A

European Economic Area (EEA) Services EIA 01-Jan-94 Yes DEuropean Free Trade Association

(EFTA) Goods & Services

FTA &

EIA 03-May-60 Yes D

Faroe Islands - Norway Goods FTA 01-Jul-93 Yes B

Faroe Islands - Switzerland Goods FTA 01-Mar-95 No A

Georgia - Armenia Goods FTA 11-Nov-98 Yes B

Georgia - Azerbaijan Goods FTA 10-Jul-96 Yes B

Georgia - Kazakhstan Goods FTA 16-Jul-99 Yes B

Georgia - Russian Federation Goods FTA 10-May-94 Yes B

Georgia - Turkmenistan Goods FTA 01-Jan-00 Yes B

Georgia - Ukraine Goods FTA 04-Jun-96 Yes B


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394



Lao People's Democratic Republic -

Thailand Goods PSA 20-Jun-91 No A

Latin American Integration Association(LAIA) Goods PSA 18-Mar-81 No A

Malaysia - Australia Goods & ServicesFTA &EIA 01-Jan-13 Yes D

Melanesian Spearhead Group (MSG) Goods PSA 01-Jan-94 Yes B

MERCOSUR - India Goods PSA 01-Jun-09 Yes D

Mexico - El Salvador (Mexico - Northern Triangle) Goods & Services


Mexico - Guatemala (Mexico - Northern Triangle) Goods & Services


Mexico - Honduras (Mexico - NorthernTriangle) Goods & Services

FTA &EIA 01-Jun-01 Yes D

Mexico - Nicaragua Goods & Services

FTA &

EIA 01-Jul-98 Yes D

Mexico - Uruguay Goods & ServicesFTA &EIA 15-Jul-04 Yes D

New Zealand - Malaysia Goods & Services

FTA &

EIA 01-Aug-10 Yes D

New Zealand - Singapore Goods & ServicesFTA &EIA 01-Jan-01 Yes C

Nicaragua and the Separate Customs

Territory of Taiwan, Penghu, Kinmenand Matsu Goods & Services

FTA &EIA 01-Jan-08 Yes D

North American Free Trade Agreement(NAFTA) Goods & Services

FTA &EIA 01-Jan-94 Yes D

Pacific Island Countries TradeAgreement (PICTA) Goods FTA 13-Apr-03 Yes D

Pakistan - China Goods & ServicesFTA &EIA 01-Jul-07 Yes D

Pakistan - Malaysia Goods & ServicesFTA &EIA 01-Jan-08 Yes D

Pakistan - Sri Lanka Goods FTA 12-Jun-05 Yes C

Panama - Chile Goods & ServicesFTA &EIA 07-Mar-08 Yes D

Panama - Costa Rica (Panama - CentralAmerica) Goods & Services

FTA &EIA 23-Nov-08 Yes D

Panama - El Salvador (Panama -Central America) Goods & Services

FTA &EIA 11-Apr-03 Yes D

Panama - Guatemala (Panama - Central


FTA &

EIA 20-Jun-09 Yes DPanama - Honduras (Panama - Central

America ) Goods & Services

FTA &

EIA 09-Jan-09 Yes DPanama - Nicaragua (Panama - CentralAmerica) Goods & Services

FTA &EIA 21-Nov-09 Yes D

Panama - Peru Goods & Services

FTA &

EIA 01-May-12 Yes D

Panama - Singapore Goods & ServicesFTA &EIA 24-Jul-06 Yes D

Panama and the Separate Customs

Territory of Taiwan, Penghu, Kinmen

and Matsu Goods & Services

FTA &

EIA 01-Jan-04 Yes D

Pan-Arab Free Trade Area (PAFTA) Goods FTA 01-Jan-98 Yes C

Peru - Chile Goods & ServicesFTA &EIA 01-Mar-09 Yes D

Peru - China Goods & Services

FTA &

EIA 01-Mar-10 Yes D


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Peru - Korea, Republic of Goods & Services

FTA &

EIA 01-Aug-11 Yes D

Peru - Mexico Goods & ServicesFTA &EIA 01-Feb-12 Yes D

Peru - Singapore Goods & ServicesFTA &EIA 01-Aug-09 Yes D

Protocol on Trade Negotiations (PTN) Goods PSA 11-Feb-73 No A

Russian Federation - Azerbaijan Goods FTA 17-Feb-93 Yes B

Russian Federation - Belarus Goods FTA 20-Apr-93 Yes B

Russian Federation - Belarus -Kazakhstan Goods CU 03-Dec-97 Yes B

Russian Federation - Kazakhstan Goods FTA 07-Jun-93 Yes BRussian Federation - Republic of

Moldova Goods FTA 30-Mar-93 Yes B

Russian Federation - Serbia Goods FTA 03-Jun-06 Yes B

Russian Federation - Tajikistan Goods FTA 08-Apr-93 Yes B

Russian Federation - Turkmenistan Goods FTA 06-Apr-93 Yes B

Russian Federation - Uzbekistan Goods FTA 25-Mar-93 Yes B

Singapore - Australia Goods & ServicesFTA &EIA 28-Jul-03 Yes D

South Asian Free Trade Agreement(SAFTA) Goods FTA 01-Jan-06 Yes D

South Asian Preferential TradeArrangement (SAPTA) Goods PSA 07-Dec-95 Yes B

South Pacific Regional Trade andEconomic Cooperation Agreement(SPARTECA) Goods PSA 01-Jan-81 No ASouthern African Customs Union

(SACU) Goods CU 15-Jul-04 Yes C

Southern African Development

Community (SADC) Goods FTA 01-Sep-00 Yes DSouthern Common Market(MERCOSUR) Goods & Services CU & EIA 29-Nov-91 Yes D

Thailand - Australia Goods & Services

FTA &

EIA 01-Jan-05 Yes D

Thailand - New Zealand Goods & Services

FTA &

EIA 01-Jul-05 Yes DTrans-Pacific Strategic Economic

Partnership Goods & Services

FTA &

EIA 28-May-06 Yes DTreaty on a Free Trade Area betweenmembers of the Commonwealth ofIndependent States (CIS) Goods FTA 20-Sep-12 Yes C

Turkey - Albania Goods FTA 01-May-08 Yes B

Turkey - Bosnia and Herzegovina Goods FTA 01-Jul-03 No A

Turkey - Chile Goods FTA 01-Mar-11 Yes D

Turkey - Former Yugoslav Republic ofMacedonia Goods FTA 01-Sep-00 Yes C

Turkey - Georgia Goods FTA 01-Nov-08 Yes C

Turkey - Israel Goods FTA 01-May-97 Yes C

Turkey - Jordan Goods FTA 01-Mar-11 Yes D

Turkey - Mauritius Goods FTA 01-Jun-13 Yes C

Turkey - Montenegro Goods FTA 01-Mar-10 Yes C

Turkey - Morocco Goods FTA 01-Jan-06 Yes C

Turkey - Palestinian Authority Goods FTA 01-Jun-05 Yes C


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Turkey - Serbia Goods FTA 01-Sep-10 Yes C

Turkey - Syria Goods FTA 01-Jan-07 Yes C

Turkey - Tunisia Goods FTA 01-Jul-05 Yes C

Ukraine - Azerbaijan Goods FTA 02-Sep-96 Yes B

Ukraine - Belarus Goods FTA 11-Nov-06 Yes B

Ukraine - Former Yugoslav Republic ofMacedonia Goods FTA 05-Jul-01 Yes C

Ukraine - Kazakhstan Goods FTA 19-Oct-98 Yes B

Ukraine - Moldova Goods FTA 19-May-05 Yes C

Ukraine -

MJIEL Vol 11 Iss 3 Article 2

Documents

Transcript of MJIEL Vol 11 Iss 3 Article 2