Christina Davis’ book, Why Adjudicate? Enforcing Trade Rules in the WTO is a timely analysis of the politics of adjudication in trade disputes. As of this writing, the book's entrance coincides with several significant filings in the WTO that make the book especially relevant and important for understanding modern trade politics. The Obama administration has filed several recent cases against China, with one case challenging China's countervailing duties and anti-dumping duties on US automobile exports and another joined by European Union and Japan over China's restrictions on exports of rare earths (as well as two other minerals Tungsten and Molybdenum). In September 2012, on the eve of a campaign visit to Ohio, the Obama government announced its intention to file a dispute against China regarding its subsidies in the automobile sector. The heavy turn to litigation in an election year in the United States resonates strongly with the book's focus on the domestic politics as the driver of enforcement strategy in the settlement of trade disputes.
The focus of the book is on the domestic logic underlying a government's move toward adjudication, a legalized resolution of trade disputes that first involves the filing of a request for consultations under the WTO's Dispute Settlement Understanding (DSU). Davis argues that governments face a fundamental commitment problem vis-à-vis domestic actors and especially the legislature, which centers on delivering on its promise to enforce trade rules when violations have been found. Davis emphasizes that the commitment problem is especially acute in democracies under divided government, when the constraints on executive autonomy are stronger due to an adversarial legislature. Under such conditions, states appeal to multilateral institutions such as the WTO in order to avert an outright trade war brought about by the use of unilateral measures. Governments use, instead, the WTO's litigation process to signal to domestic interest groups – especially politically powerful industries that contribute generously to the sitting government – its commitment to enforcing trade rules that are in effect with partner countries.
More broadly, the book engages the relationship between domestic politics, centering on democracy and the constraints on the executive, and the enforcement strategies of governments in choosing between no action, negotiation, unilateral action, and adjudication in addressing trade conflicts. The main hypothesis of the book is that democracies, and especially democracies that are characterized by divided rather than unified governments, are more likely to turn to adjudication rather than to negotiation outside the WTO. The quantitative analysis that opens the empirical sections of the book juxtaposes an overall indicator of democracy based on the Polity IV data with various institutional features of democratic polities: checks on the executive, electoral systems, left–right orientation of the executive, and democratic values measured in terms of a country's years as a democracy.
Davis finds consistent empirical support for the overall indicator of democracy and checks on executive autonomy to be positively associated with filing a dispute at the WTO. The results indicate that, indeed, there is a ‘democratic propensity’ in which constraints on the executive and the nature of the trade policy process lend themselves to a more litigious government that signals its resolve to enforcement of trade rules through adjudication rather than negotiating with trade partners. Moreover, Davis also finds that democracies are more likely to find themselves as respondents in WTO dispute cases and that allies are also more likely to file disputes against one another.
The book is well-triangulated in the evidence it brings to bear on the main argument about democracies and the appeal to legalized trade dispute resolution. Davis' empirical analysis is complemented with case studies of the United States and Japan, which feature extensive interviews and rich historical detail. The case study chapters are especially valuable and insightful for their use of original data that include potential as well as actual disputes, an issue on which the literature has been largely silent. The United States as ‘The Litigious State’ provides a strong illustration of Davis' argument about the role of democracy and domestic political constraints in promoting the adjudication of trade disputes. The quantitative analysis provides greater depth to the substantive argument, as it finds that for trade conflicts in which industries make large political contributions and where industries of prospective defendant countries are resistant (measured in terms of import penetration), adjudication is the likely route for dispute resolution. Even in managing economic and diplomatic relations with China, WTO adjudication became a ‘compromise’ tool that allowed the executive to respond to domestic actors through the moderate action of litigation, providing a middle ground between negotiation and unilateral retaliation.
The counterpoint to the US case is Japan, aptly named the ‘The Reluctant Litigant’ in this story of a long-standing unified government whose WTO case filings are shaped more by bureaucratic interests than by lobbying. The Japan chapter provides empirical support for the other end of the hypothesis, where an autonomous executive less constrained by the legislature pursues a more selective strategy that privileges negotiation over adjudication. Japanese trade policy is dominated by an exclusive elite of bureaucrats in an executive that is largely autonomous from the legislature thanks to a high level of delegation. Analyses parallel to the US case study, also using an original dataset of trade barriers, test the impact of political contributions on forum choice: no action, negotiation, or WTO adjudication. As a country in which the executive faces few constraints in trade policy, the size of the industry, rather than the level of political contributions as in the US case, pushes a trade barrier case toward WTO adjudication. Nevertheless, greater political contestation over time, with the Liberal Democratic Party losing its hold of the Diet in the early 1990s and beyond, has given rise to a more litigious Japan as well in recent years. Consistent with the overall message of the book, however, Japan's preference for adjudication applies to fellow democracies such as the United States, while continuing to favor negotiation in addressing trade conflicts with China.
Davis' book is also comprehensive in scope, as it examines not only the domestic political determinants of adjudication but also the efficacy of WTO's dispute settlement to actually bring about the resolution of disputes. The complementary chapter on the effectiveness of adjudication posits the counterfactual of a similar case that does not go through adjudication. Davis employs matching techniques to compare the relative efficacy of negotiation and adjudication for the trade barrier cases analyzed in the US case study. The analysis finds that adjudication is relatively more successful in removing illegal trade barriers and in shortening the duration of trade disputes, thus highlighting the relative effectiveness of adjudication vis-à-vis negotiation. The follow-up chapter utilizing case studies of developing countries' adjudication activity delivers a similar message: while WTO member Peru saw success in filing (and winning) its dispute with the EU over the latter's labeling laws, Vietnam's recourse in its pre-WTO years only to negotiation with the US was not so fortunate. In a most entertaining account of the politics of protectionism, the Vietnamese catfish becomes an untoward victim of lobbying by the Catfish Farmers of America (CFA), which first insists that the Vietnamese variety are not catfish (contrary to scientific usage) in order to make it less attractive on the US market and later, when this move has no impact on sales, then fights to re-attach the ‘catfish’ label so as to make these imports the target of antidumping duties.
We receive two important messages from this book: democracies are more likely to take trade conflicts to court at the WTO, and WTO adjudication is effective, relative to other modes of dispute resolution such as negotiation. In doing so, the book also raises questions that point to avenues of future research. First, how do democracies resolve their disputes once they file their complaints? As the book notes, about half the filings move to actual arbitration through panels and, in many cases, cases are resolved without a ruling. Do democracies significantly populate those cases that go to formal arbitration or are they more likely to end with a mutually agreed solution (MAS), another frequent outcome of dispute filings? The book is largely silent on the issue of ‘escalation’ between the informal and formal stages of the WTO's dispute settlement process, perhaps because the literature is already quite dense and well-established. However, the distinction between filing (request for consultation) and formal arbitration through a panel is relevant: if the former signals commitment to enforcement, the latter delivers it. The act of requesting a panel (and having to do so twice if the respondent blocks the first attempt), and subsequently composing this panel, is much more than political theatre that assuages domestic interests and balances diplomatic ties. Davis rightly points out that many cases simply stall, remaining indefinitely ‘in consultations’ or without a panel ever being composed. Future scholarship may address whether the book's argument can be extended to identify the conditions under which regime type is associated with specific dispute resolution outcomes. Cases such as the Fuji–Kodak dispute and the equally infamous transatlantic spats over bananas and hormone-treated beef are strongly indicative of the willingness of democracies to push through disputes to arbitration. However, if the filing of a dispute suffices as a signal, then the above cases may well be the exceptions rather than the rules. Democracies, whether as complainants or respondents, and especially if the trade conflict is among democratic ‘friends’, a mutually agreed solution (MAS) or some equivalent informal resolution may be the favored outcome.
Second, what can we expect to see for democratizing countries and their choice of enforcement strategy? The analysis in the book finds no effect for the years as a democracy, and the ‘democratic propensity’ for adjudication is applicable for countries with a Polity score of 7 or above, indicating established democracies. As such, the analysis emphasizes comparisons across countries and calls for further examination into the longitudinal effects of democratization, especially as polities undergo political and economic reform. It appears that democracy overall, and constraints on the executive by the legislature in particular, are associated with greater likelihood of dispute filing. It also suggests, in turn, that democratizing countries, until they achieve a level of institutionalization that includes checks on the executive, are more likely to resort to alternative modes of dispute resolution, namely unilateral action and/or negotiation. Testing such a hypothesis would broaden the debate on developing country usage of the WTO dispute settlement system, as many of these countries (such as Brazil) are also democratizing countries.
In Why Adjudicate?, Christina Davis reminds us that legalization is, indeed, politics – or more to the point diplomacy – by other means. The book provides a cogent and compelling domestic logic for why and how this is the case. Governments appeal to adjudication in their trade disputes to reward politically powerful domestic interests and to signal resolve to intransigent trade partners. Adjudication offers an attractive alternative to unilateral action and to trade wars, and, especially for democracies, legalized dispute resolution provides an effect to address domestic pressures without unduly harming diplomatic relations. Davis' book, a solid contribution by one of today's leading trade scholars, is also valuable for directing greater attention to how members navigate the multilateral trade regime, which is as important as the judicial activism of its arbitration panels. The book's findings have implications not only for the future of WTO dispute settlement reform – less is better – but for the benefits of legalization more broadly. Legal venues offer a compromise forum that enable governments to signal commitment to enforcement of international rules while at the same time ensuring that cooperation with other countries remains strong and positive.
