Why Not Bargain? The Domestic Politics of Utilizing the World Trade Organization’s Dispute Settlement Mechanism

Abstract

The World Trade Organization’s dispute settlement mechanism is based on either bilateral bargaining or third-party rulings by a panel or the Appellate Body. When do countries utilize the multilateral procedure, and under what conditions do they opt for a bilateral agreement? Departing from previous studies emphasizing the role of the complainant in shaping the course of the dispute settlement mechanism, this article offers an explanation based on the strategic choices of respondents. This study suggests that the domestic political interests of respondent governments determine the use of the dispute settlement mechanism’s multilateral track. We argue that respondent governments choose the multilateral track to seek political cover for domestically unpopular concessions to a complainant. Such cover is required when (1) the dispute at stake has high public salience and (2) the respondent faces an upcoming election. Our hypotheses are tested using World Trade Organization’s dispute cases from 1995 to 2017.