All treaties, from human rights to international trade, include formal exceptions that allow governments to legally break the rules that they have committed to, in order to deal with unexpected events. Such institutional 'flexibility' is necessary, yet it raises a tricky theoretical question: how to allow for this necessary flexibility, while preventing its abuse? Krzysztof Pelc examines how designers of rules in vastly different settings come upon similar solutions to render treaties resistant to unexpected events. Essential for undergraduate students, graduate students, and scholars in political science, economics, and law, the book provides a comprehensive account of the politics of treaty flexibility. Drawing on a wide range of evidence, its multi-disciplinary approach addresses the paradoxes inherent in making and bending international rules.
AbstractThe treatment of foreign investment has become the most controversial issue in global governance. At the center of the controversy lies the mechanism of investor-state dispute settlement (ISDS), which allows private firms legal recourse against governments if government interference has degraded their investment. Using newly released data covering 742 investment disputes, I assess some of the central claims about ISDS. I argue that the regime has indeed undergone an important shift: a majority of claims today deal not with direct takings by low-rule-of-law countries, but with regulation in democratic states. Such "indirect expropriation" claims have seen a precipitous decrease in their odds of legal success over the past twenty years. They are also far less likely to result in early settlement. These parallel trends may be a result of a rise in strategic litigation by investors whose aim is not only to obtain compensation but also to deter governments' regulatory ambitions.
The concept of precedent is fundamental to domestic courts, especially in Anglo-American common law systems, where judges are bound to the court's past decisions. By contrast, precedent has no formal authority in international law. Legal scholars point to Article 59 of the International Court of Justice (ICJ) Statute in this respect, according to which international legal rulings are binding only on the parties in the dispute at hand, and have no bearing on matters outside of the case.
AbstractHow does international law affect state behavior? Existing models addressing this issue rest on individual preferences and voter behavior, yet these assumptions are rarely questioned. Do citizens truly react to their governments being taken to court over purported violations? I propose a novel approach to test the premise behind models of international treaty-making, using web-search data. Such data are widely used in epidemiology; in this article I claim that they are also well suited to applications in political economy. Web searches provide a unique proxy for a fundamental political activity that we otherwise have little sense of: information seeking. Information seeking by constituents can be usefully examined as an instance of political mobilization. Applying web-search data to international trade disputes, I provide evidence for the belief that US citizens are concerned about their country being branded a violator of international law, even when they have no direct material stake in the case at hand. This article constitutes a first attempt at utilizing web-search data to test the building blocks of political economy theory.
There is considerable variation in the depth of countries' commitments at the World Trade Organization (WTO). While WTO members apply tariffs on imports at roughly comparable levels, the maximum levels allowed on these tariffs vary dramatically, leaving some members with far more flexibility to raise trade barriers overnight. Some countries have argued that such "binding overhang" is harmless unless it is exploited, while other countries disagree. This paper is the first attempt to empirically assess the effect of binding overhang on trade flows. I argue that the mere existence of binding overhang has a strongly negative effect on trade, through the way in which it muddles expectations. Using data at the 4-digit harmonized system product level, covering the WTO membership from 1995 to 2008, I demonstrate that the cost in terms of lost trade resulting from the ability to legally raise a tariff by one point is tantamount to nearly half the cost of having done so. In sum, WTO membership is, by itself, no panacea. Negotiating greater tariff flexibility can water down a country's legal commitments and significantly reduce the benefits flowing from the institution. Adapted from the source document.
A close look at the commitments of World Trade Organization (wto) members presents a striking paradox. Most states could raise their duties significantly before falling afoul of their wto obligations. Moreover, such "binding overhang" varies between countries: some could more than double the amount of trade protection they offer overnight, whereas others are tightly constrained. What accounts for this variation? The author argues that more flexibility is not always better: obtaining it and subsequently using it are both costly. Rather than maximize flexibility, states thus seek an optimal amount. If they have access to policy space through other means, such as currency devaluations and trade remedies, they will exercise restraint in seeking binding overhang. The same supply-side logic holds at the domestic level: governments strategically withhold binding overhang from industries that are able to rely on trade remedies, despite the fact that these tend to have the greatest political clout. (World Politics / SWP)
A close look at the commitments of World Trade Organization (WTO) members presents a striking paradox. Most states could raise their duties significantly before falling afoul of their WTO obligations. Moreover, such "binding overhang" varies between countries: some could more than double the amount of trade protection they offer overnight, whereas others are tightly constrained. What accounts for this variation? The author argues that more flexibility is not always better: obtaining it and subsequently using it are both costly. Rather than maximize flexibility, states thus seek an optimal amount. If they have access to policy space through other means, such as currency devaluations and trade remedies, they will exercise restraint in seeking binding overhang. The same supply-side logic holds at the domestic level: governments strategically withhold binding overhang from industries that are able to rely on trade remedies, despite the fact that these tend to have the greatest political clout.
AbstractThe process by which countries accede to the World Trade Organization (WTO) has become the subject of considerable debate. This article takes a closer look at what determines the concessions the institution requires of an entrant. In other words, who gets a good deal, and who does not? I argue that given the institutional design of accession proceedings and the resulting suspension of reciprocity, accession terms are driven by the domestic export interests of existing members. As a result, relatively greater liberalization will be imposed on those entrants that have more valuable market access to offer upon accession, something that appears to be in opposition to expectations during multilateral trade rounds, where market access functions as a bargaining chit. The empirical evidence supports these assertions. Looking at eighteen recent entrants at the six-digit product level, I find that controlling for a host of country-specific variables, as well as the applied protection rates on a given product prior to accession, the more a country has to offer, the more it is required to give. Moreover, I show how more democratic countries, in spite of their greater overall depth of integration, exhibit greater resistance to adjustment in key industries than do nondemocracies. Finally, I demonstrate that wealth exhibits a curvilinear effect. On the one hand, institutionalized norms lead members to exercise observable restraint vis-à-vis the poorest countries. On the other hand, the richest countries have the greatest bargaining expertise, and thus obtain better terms. The outcome, as I show using a semi-parametric analysis, is that middle-income countries end up with the most stringent terms, and have to make the greatest relative adjustments to their trade regimes.
