A Regional Weapon of Choice: Forum Choice in International Trade Disputes

What explains a state.s choice to utilize a regional dispute settlement mechanism to resolve a trade dispute with another state instead of the global, multilateral forum of the World Trade Organization (WTO)? I argue that experience in regional dispute settlement mechanisms (DSMs) provides the opportunity for learning about the phases and specifics of the regional dispute resolution process. By learning through previous regional dispute experience, a state is able to generate a more accurate assessment of the expected outcome, costs, and value of bringing a current dispute to a regional forum and, thus, which forum is more preferred. However, I hypothesize that the extent of learning varies. I expect that the effect of previous regional dispute experience on future decisions to utilize a regional forum, given that a multilateral alternative exists at the WTO, is conditioned by a state.s learning capacity. This conditional effect is due to variation in the ability and incentive of a state to learn. Each is measured by a state.s available resources, i.e., its level of development and the economic relationship of the disputing dyad. I posit that the learning that occurs makes these DSMs stumbling blocks toward multilateral trade dispute resolution. I test my expectations using newly-collected original data on the initiation of and rulings issued by the dispute settlement bodies associated with the Andean Community (CAN), Central American Common Market (CACM), Common Market of the South (CACM), North American Free Trade Agreement (NAFTA), and the World Trade Organization (WTO) between 1995 and 2010. I find that previous regional dispute experience increases the likelihood of initiating a current regional dispute in a particular subject area, relative to initiating a WTO dispute. In line with my expectations, I also find that the effects of previous experience vary. The effects of previous experience are conditioned by a state.s learning capacity and the amount of previous experience. These results are robust to different conceptualizations of previous experiences and model specifications. The findings of this project demonstrate that the regional dispute settlement mechanisms act as a stumbling block toward multilateral trade dispute resolution.