Legalization and Compliance

As the economy becomes increasingly globalized and the need for international cooperation increases, nations have been coordinating their economic policies through liberal international institutions. On the other hand, economic decision making is still entrusted to sovereign nation-states. How can one reconcile these two imperatives of international cooperation and national sovereignty? According to the conventional wisdom of International Political Economy (IPE), “embedded liberalism” (international liberalism embedded in sovereign policymaking) has been an established framework for much of the postwar period; however, due to the acceleration of economic globalization in recent years, it is feared that embedded liberalism may be eroding.<br>The global trading system of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) is a case in point: due to the greater need for trade liberalization and also for achieving compliance with the liberal trade rules, both of which emanate from economic globalization, the system has been greatly institutionalized or “legalized” in recent years. This in turn gives sovereign member states even less room to maneuver. Under the Dispute Settlement Understanding (DSU) of the WTO, the “negative consensus” rule, implying greater automaticity, is now applied to the legal proceedings of dispute settlement.Therefore, members whose policy violates GATT/WTO rules may be compelled to comply with panel recommendations, although the policy in question may enjoy widespread democratic support at home. If this is true, legalization may increase compliance, but only at the expense of national sovereignty. Is this really the case?<br>By quantifying compliance under the GATT/WTO dispute settlement system in terms of the amount of elapsed time occurring since violation findings, this article analyzes the political determinants of compliance with the GATT/WTO rules. The quantitative analysis of national compliance behavior suggests the following: First, many members accused of violations by the GATT/WTO experience difficulties in meeting the tight deadlines set for rectifying their policies. Second, these delays are observed frequently when complainants are developing countries and defendants are developed countries. Third, “legalization” of the dispute settlement after the establishment of the DSU has not markedly reduced the incidence of delays in implementation of panel recommendations.<br>Thus, compliance under the GATT/WTO system is related to the dictates of international politics in at least two major ways: First, compliance delays serve as a cushion for defending sovereign states; second, compliance under a legalized system is still at the mercy of power politics.