Adjudication without Enforcement in GATT Disputes

TLDR

Disputes under the General Agreement on Tariffs and Trade (GATT) exhibit a puzzling selection effect. The study seeks to explain why states engage in plea‑bargaining under GATT despite its lack of enforcement by developing an incomplete‑information model of trade bargaining that includes an adjudication option. The model assumes plaintiffs act with greater resolve before a ruling, anticipating that defendants may be compelled to concede to an adverse judgment even if that belief later proves false. The study finds that defendants concede more before GATT judgments than after, and that plaintiffs’ anticipatory resolve leads to more generous settlements even from non‑compliant defendants, while the effect disappears after a ruling, showing that the threat of adjudication conditions state behavior even without enforcement through mechanisms not previously identified.

Abstract

Disputes under the General Agreement on Tariffs and Trade (GATT) exhibit a puzzling selection effect. Defendants concede more prior to GATT judgments than afterward, despite GATT's lack of enforcement power. Yet, why would states plea-bargain if they know they can spurn contrary rulings? To find out, the article develops an incomplete information model of trade bargaining with the option of adjudication. The plaintiff has greater resolve prior to a ruling, believing that the defendant might be compelled to concede to an adverse judgment—even if that belief later proves false. Surprisingly, this resolve induces more generous settlements even from defendants who intend not to comply with any ruling. After a ruling, however, this anticipatory effect is irrelevant: adjudication works best when threatened but not realized. The prospect of adjudication thus conditions the behavior of states even when enforcement is not forthcoming but not through mechanisms identified by previous studies.