International institutions have acquired an almost obvious presence in international politics and the question of their design has received prominent attention in recent years. Apart from key organizational characteristics like size of their membership, policy scope, depth of cooperation, decision-making rules, and their degree of openness towards non-state actors, one of their most striking features is their differing degree of legalization or judicialization (Goldstein and Martin, 2000; Zangl, 2008). Some institutions possess strong enforcement mechanisms or rules, while others rely on voluntary cooperation by their members.

The creation of the World Trade Organization (WTO)'s dispute settlement system (DSS) in 1995 remains one of the most puzzling outcomes in international politics and international law in the 1990s. We provide a new explanation for this move to law. We argue that important contextual variables of the negotiations have been largely overlooked by existing explanations, namely ‘experiential learning’. While negotiations to create institutions are characterized by uncertainty about distributional effects, negotiators will look for clues that moderate uncertainty. In the context of the Uruguay Round negotiations, a significant amount of information was drawn from actual practice and experience with the existing General Agreement on Tariffs and Trade (GATT) dispute settlement system. In short, experience gained with judicial institutions and outcomes is important to understand the key results of the negotiations: a legalization leap, more specifically a judicialization of the existing dispute settlement system. We focus on the two dominant actors in the negotiations (the United States and the (then) European Community) and provide evidence for our argument based on an analysis of GATT cases in the 1980s, GATT documents, and in-depth interviews with negotiators who participated in the negotiations.

In the current multilateral trade regime, members often negotiate under the shadow of WTO law. This article develops a formal explanation of the way in which the credible threat to resort to and the actual use of WTO litigation can influence multilateral trade negotiations. We contend that the ability to impose costs on a defendant by way of litigation increases the complainant's bargaining power, opening a bargaining window and ultimately increasing the chances for cooperation in multilateral trade negotiations. On the other hand, the complainant's preference for loss-mitigation over gains from retaliation and its expectations about the likelihood that the defendant will not comply with an adverse ruling can augment the defendant's bargaining leverage. Thus, contrary to conventional wisdom, increased enforcement does not necessarily make actors shy away from further cooperation, although the credibility of the defendant's non-compliant threats crucially affects the location of any potential negotiated agreement. Empirically, we show that the argument can account for how Brazil, a potential complainant, and the EU and the US, two potential defendants, approached and bargained agricultural negotiations in the Doha Round.

What explains change in third party dispute settlement in regional international organizations (RIOs)? This paper confronts this question by exploring the extent to which different explanations of institutional change hold in the context of trade RIO third party dispute settlement. The paper considers the role of three variables in explaining dispute settlement reform: the balance of power, the level of trade interdependence between member states and the nature of the organization's founding contract. A truth table reveals that although power and trade interdependence can explain some cases of institutional reform, the nature of the organization's founding contract is the strongest predictor for change in dispute settlement. Nevertheless, the analysis shows that not all cases can be explained, and that the influence of other institutions on the same issue can also play an important role. A case study of the Latin American Free Trade Association illustrates the importance of the institutional environment in which the RIO operates for institutional reform.

This paper focuses on the variability of judicialization across preferential trade agreements (PTAs) and their impact on trade flows. We develop a categorization of PTAs that contrasts enforcement mechanisms with the level of trade policy discretion allowed by a trade agreement and the degree of flexibility allowed for members. Utilizing an original dataset of PTAs signed by countries in Asia, which has emerged as one of the most active regions of PTA formation and which exhibits wide variability in levels of judicialization, we compare the effects of trade policy discretion, flexibility provisions, and enforcement mechanisms in PTAs on trade flows. We examine the empirical strength of our theoretical framework distinguishing between discretion, flexibility, and enforcement using confirmatory factor analysis. The empirical analysis then goes on to examine their respective effects on trade flows. The results show that agreements with strong commitments, that is, those that remove more trade policy discretion from a government, lead to a greater expansion of trade between signatories. Enforcement and flexibility mechanisms, however, have mixed effects.

Preferential trade agreements (PTAs) have to be consistent with the WTO. Their monitoring at the multilateral level has failed so far for various reasons. The question arises what to do? Completion of the contract (‘legalization’) has failed repeatedly, and, in light of vested interests and incentives, there is no reason to believe it can succeed now. Judicialization can be discarded as well, since the incentives to enforce the WTO contract in this respect are lacking. The good arguments thus lie in favour of building bridges between the WTO and PTAs, and the weaker arguments with an effort to enhance enforcement against PTAs through either judicialization or legalization of the monitoring process.