Democracy, Consultation, and the Paneling of Disputes under GATT

Studies of the General Agreement on Tariffs and Trade (GATT) stress the role of formal panels in adjudicating trade conflicts. Yet most cases are settled beforehand in informal consultations. This article tests two sets of hypotheses about the decision to escalate GATT cases, one concerning the significance of the right to a panel, the other concerning the effects of political regime type. Results show that the right to a panel did not inspire more early settlement, more escalation, or more resolution through concessions at the panel stage; however, highly democratic dyads are more likely to achieve concession, but only at the consultation stage. This suggests that a strategy of tying hands, rather than adherence to legal (and other) norms of conflict resolution, is likely to shed light on the way democracies use formal third-party adjudication at GATT. States have long sought to have their conflicts adjudicated by institutions. Nowhere is this more evident than in international trade, and nowhere more puzzling than in the case of dispute settlement under the General Agreement on Tariffs and Trade (GATT). Often dismissed as a quasi-judicial system held together by countless loopholes, GATT dispute settlement has nonetheless enjoyed marked success. Indeed, against all expectations, this institution has not only resolved an impressive number and variety of trade conflicts, but has helped anchor an increasingly rules-based global economy. In the search for clues to this puzzle, scholars have been quick to look at the formal side of dispute settlement, focusing on the role played by GATT panels in particular. Although few would disagree that these ad hoc tribunals are important, the fact is that most cases are never brought before a panel. Instead, the majority of cases are either withdrawn or resolved in consultations, an informal and required first stage in the GATT dispute settlement process. The decision to panel a case is thus an escalation that needs to be explained, one that raises questions about the design and efficacy of dispute settlement institutions more generally. This article takes up these questions