The (Domestic) Power of Legalization: U.S. Support of WTO Dispute Settlement

Alex Thompson

Department of Political Science

Ohio State University

PUZZLE

Why did the U.S. spearhead dispute settlement reform during the Uruguay Round (1986-1994)?

Theoretical puzzle:

– Realism

– Bargaining Power

– Delegation to IOs

– Smith 2000

EXISTING EXPLANATIONS

• Efficiency arguments• Efficient breach• Expand trade• Deep Cooperation → Enforcement

– Problems: Don’t explain U.S. support Don’t explain timing

• Commitment argument• End of Cold War (Goldstein & Gowa 2002)

– Problem: Empirical

STATE LEADERS AND IOs

Relative to other domestic actors, executives benefit from shifting policy issues to the international level.

• Agenda setting• Control• Information/expertise• Bargaining advantage

Literature: Moravcsik 1994, Drezner 2003, Brewster 2004

Argument:

By shifting the resolution of trade disputes to the international level, the President gained influence relative to Congress, even at the risk of diminishing U.S. influence over its trading partners.

Implication 1

Divergent preferences: President and Congress in mid-1980s.

• Trade deficit on the rise in early and mid-1980s• # of AD petitions going up in 1980s—peak year is 1985• # of trade bills introduced in Congress increases

dramatically in mid-1980s– Senate aide in 1985: “The target isn’t the Japanese; it’s the

White House” (Destler 1992)

• Omnibus Trade and Competitiveness Act of 1988– Explicitly designed to check President’s power

U.S. BOP (Millions of $)

-160000

-140000-120000

-100000

-80000

-60000-40000

-20000

020000

4000019

70

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

Implication 2Intentionality: Evidence that Executive branch

sought DS reform for hypothesized reason.

• Executive branch backlash against pressure from Congress- USTR Carla Hills warned the Senate that “Unilateral retaliation can undermine the very system of international rules we are trying to promote and expand in the Uruguay Round.”

- Letter from Reagan cabinet to House Speaker: “Proposed amendments…would have enormous trade chilling effects, would likely provoke retaliation and mirror legislation, and would flatly violate our international obligations…..We cannot accept the premise that the test of a ‘tough’ trade bill is the extent to which it removes Presidential discretion.”

• Interviews: Confirm that domestic balance of power was

a consideration

Implication 3

President advantaged in practice under WTO DSM.

• Commerce official: The new DSM “allows us to raise concerns in a non-threatening manner.”

• USTR official: WTO rulings “give legitimacy to our claims, which helps us with foreign governments and with Congress.”

• International legal rulings offer hands-tying benefits, political cover for leaders (Reinhardt 2003; Allee & Huth 2006)

• Result is sticky: DSU remains despite complaints and calls for reform from Congress

CONCLUSIONS

• Better understanding of an intrinsically important case

• Legalization literature too state-centric (Goldstein & Martin 2000)

• Domestic politics explanation for why powerful states delegate to IOs

Growth of World Merchandise Exports

0

2000000

4000000

6000000

8000000

10000000

12000000