Christina Lynn Davis

Professor, Politics and International AffairsHarvard University

Award Information

Abe Fellowship 2006

Assistant Professor, Woodrow Wilson School of Public and International Affairs, PoliticsPrinceton University

Adjudication and the Politics of Opening Markets: Trade Strategies of Japan and the United States

Increasing levels of trade that accompany globalization generate both wealth and conflict as states confront each other with demands for market access and protection for sensitive industries. The World Trade Organization helps states manage this conflict through a common set of negotiated multilateral rules and a formal dispute settlement system. Theories address why states design institutions with adjudication mechanisms and how reputation penalties encourage compliance with legal rulings (Keohane et al, 2000; Maggi 1999). Research has also shown the domestic political constraints that lead states to violate agreements they have signed (Rosendorff , 2005). Less is known, however, about the conditions that lead states to challenge non-compliance . Existing literature on WTO adjudication examines cases that have been initiated without considering the many violations that are not being challenged and alternative negotiation strategies (Busch 2000). By studying the use of WTO adjudication relative to other trade strategies, I address a central issue about the monitoring and enforcement of international law. While some states actively use adjudication to address foreign trade barriers, others prefer negotiation . Economic interests alone do not explain this variation in trade strategies. The United States and Brazil are among the most litigious, while Japan uses trade adjudication less than one would expect given its wealth and trade interests. To understand the selection and effectiveness of trade strategies, one must look at how domestic institutions and litigation practice shape the propensity of a state to use international adjudication. I argue that litigiousness and political pressure drive some states to be high users of adjudication. Given that going to court to resolve a trade problem raises transaction costs, a negotiated settlement is more efficient . Two factors increase the likelihood that states will nevertheless resort to adjudication. First, as legal costs fall, states will bargain harder and be more willing to take legal action in the face of negotiation stalemate. Litigation in the domestic context develops the skills and norms to use legal resources for dispute resolution. Therefore I expect states with strong judicial systems and frequent litigation at home to be more active in trade adjudication because they face relatively lower transaction costs. Second, domestic political pressure can lead a state to use adjudication as a costly signal of its support for an interest group. Therefore I expect politically influential industries to be more likely to be selected for adjudication . The argument is tested at the cross-national level and through comparison of U.S. and Japanese trade policies . Statistical analysis shows that across WTO members strong domestic legal institutions support more active adjudication . The United States and Japan present a useful comparison. The United States represents a litigious state with a politicized trade policy process, while Japan has relative1y lower levels of domestic litigation and lobbying on trade policy. Whereas the United States has been very active in WTO adjudication and consistently uses this strategy for industries that are major sources of political contributions, Japan follows a more selective adjudication strategy and only initiates a few cases for large industries.