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The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts.

In recent years two parallel trends have emerged in the organization of international trade. The first development is the rise of regionalism, with a host of new integration initiatives drawn along geographical lines. More than thirty regional accords were officially notified to the General Agreement on Tariffs and Trade (GATT) between 1990 and 1994 alone, a total exceeding that of any previous five-year period. [1] The second is a distinct but less widespread move toward legalism in the enforcement of trade agreements. To an unusual extent trading states have delegated to impartial third parties the authority to review and issue binding rulings on alleged treaty violations, at times based on complaints filed by nonstate or supranational actors. Separately, the two trends have garnered scholarly attention, sparking comparative analysis of regional versus multilateral arrangements and debates regarding the political dynamics of judicialization within individual pacts, especially in Europe. [2] The intersectio n of these two trends, however, remains little examined.

Few comparative studies of institutional form, across different trade accords, have been undertaken. This is curious, for regional trade pacts exhibit considerable variation in governance structures. Moreover, questions of institutional design--which constitute a dimension of bargaining distinct from the substantive terms of liberalization--have proven contentious in recent trade negotiations, underscoring their political salience. [3] The creation of supranational institutions in regional trade accords has direct implications for academic debates regarding sovereignty, globalization, and interdependence. Nevertheless, research on this particular issue remains scarce. Scholars have examined the strategic behavior of disputing states and judges within isolated agreements, but few have aimed to account for variation in the organizational details of international trade. [4]

Addressing this gap, I focus on a specific aspect of governance in international trade: the design of dispute settlement procedures. In particular, I investigate the conditions under which member states adopt legalistic mechanisms for resolving disputes and enforcing compliance in regional trade accords. Some pacts are diplomatic, requiring only consultations between disputing states, but others invest standing judicial tribunals with the authority to issue prompt, impartial, and enforceable third-party rulings on any and all alleged treaty violations. To account for these variable levels of legalism, I offer a theory of trade dispute settlement design based on the domestic political trade-off between treaty compliance and policy discretion. The chief implication of this theory highlights the importance of economic asymmetry, in interaction with the proposed depth of integration, as a robust predictor of dispute settlement design. This framework helps explain otherwise puzzling delegations of authority by so vereign states to supranational judiciaries, linking variation in institutional design to domestic political factors conventionally ignored by traditional systemic theories of international relations. It also complements recent work combining elements of international law and international relations theory. [5]

At issue in this study is the nature of ex ante institutional design, not the record of ex post state behavior. During trade negotiations, governments stand, in part, behind a veil of ignorance with regard to future implementation of the treaty and future disputes. The question I investigate involves the type of dispute settlement mechanism, given this uncertainty, the signatory states agree to establish. In advance of actual integration, it is difficult to distinguish sincere commitments from symbolic ones. Even the most successful regional initiative, the European Union, has weathered crises of confidence in its uneven movement toward a single market. [6] Without evaluating the extent to which integration has proceeded, I seek to explain the design of the institutions within which that process unfolds. I examine the institutional structure of the general game, not the outcome of specific disputes, which depend on strategic interactions and highly contextual international and domestic political variables. M ultiple policy outcomes and compliance rates may function as equilibria under a single dispute settlement mechanism, and this study remains for the most part neutral with respect to subsequent use of a particular procedure.

Nevertheless, I do assert that legalism tends to improve compliance by increasing the costs of opportunism. Legalistic mechanisms alter the cost-benefit calculus of cheating by increasing the probability of detection, resolving conflicts of interpretation, and endorsing commensurate sanctions or making rulings directly applicable in domestic law. As the debate over the role of the European Court of Justice suggests, even the most legalistic of mechanisms may not guarantee treaty compliance by sovereign states willing to defy its rulings. [7] Likewise, the least legalistic of pacts may give rise to highly successful integration. [8] Legalism is thus neither a necessary nor a sufficient condition for full compliance. Without determining it, legalism does influence compliance by providing rulings of violation that are viewed as credible and legitimate by the community of member states. This information at a minimum increases the reputational costs of noncompliance, potentially jeopardizing opportunities for fut ure international cooperation on issues of relevance to the domestic economy. [9]

In the first section of the article I introduce the dependent variable, levels of legalism, by identifying specific institutional features that render one dispute settlement mechanism more or less legalistic than another. Next I sketch the elements of a theory of dispute settlement design, defining the basic trade-off and how it varies. Subsequent sections delimit the data set of regional trade agreements and summarize the principal characteristics of their dispute settlement mechanisms. Finally, after defining an index of economic asymmetry and indicators of depth of integration, I evaluate the explanatory leverage of my analytical framework, comparing it briefly to alternative approaches that emphasize the transaction costs of collective action or the functional requirements of deep integration.

Defining the Spectrum: From Diplomacy to Legalism

Discussions of dispute settlement in international and comparative law texts present the universe of institutional options as a standard set that ranges from direct negotiation at one extreme to third-party adjudication at the other. [10] Which features of institutional design determine the level of legalism along this spectrum? The first question is whether there is an explicit right to third-party review of complaints regarding treaty application and interpretation. A handful of agreements provide only for consultations and perhaps mediation or conciliation, which implies a very low level of legalism in that the disputing parties retain the right to reject any proposed settlement lawfully--the hallmark of a diplomatic system. [11] These pacts are identical in effect to treaties that offer an arbitral process but require explicit consent from all parties to the dispute, including the defendant, before the arbitration proceeds. In either situation, disputes will be addressed exclusively through bilateral nego tiation and self-help measures if one disputant is averse to scrutiny from a third party. In other agreements, such as the 1981 Gulf Cooperation Council (GCC), member countries that are not directly involved in the dispute may control access to the arbitration process. They play the role of political gatekeeper, ensuring that only cases deemed worthy by the community reach the dispute settlement process. The chance of a political veto of third-party review renders such mechanisms less legalistic than others in which complaints automatically qualify for arbitration.

Where there is an automatic right to third-party review, the second issue concerns the status in international law of rulings that result from the dispute settlement process. The question is whether arbitral or judicial rulings and reports are formally binding in international legal terms. Many treaties stipulate that disputants have an international legal obligation to comply with rulings. The 1985 U.S.-Israel Free Trade Agreement, by contrast, treats third-party decisions as mere recommendations in the form of a conciliation report. Other treaties give legal force to arbitral rulings only after they have been officially adopted, and perhaps substantially revised, by political representatives of the member governments acting through one of the pact's governing institutions. [12] If the disputants can lawfully ignore panel recommendations or sabotage panel reports by lobbying political allies, the system is less legalistic than mechanisms whose third-party rulings directly and irreversibly create an internat ional legal obligation.

The next question concerns third parties--in particular, the number, term, and method of selecting arbitrators or judges in each treaty. At the diplomatic end of the spectrum are mechanisms that call for the appointment of ad hoc arbitrators to address a particular dispute. In the event that the disputing parties cannot agree on the composition of the arbitral panel, most agreements designate a neutral third party to appoint the remaining members. Having delivered its arbitral report, the panel disbands. At the legalistic end of the spectrum are treaties that create a standing tribunal of justices who rule collectively on any and all disputes during extended terms of service. Even in the absence of explicit stare decisis, decisions made by a standing tribunal are likely to be more consistent over time--and thus more legalistic--than rulings by ad hoc panels whose membership changes with each dispute. On the selection of third parties, most agreements lie between these two poles. What varies is the extent to which disputants are able to angle strategically for sympathetic or biased judges. With a standing tribunal, the parties have little if any influence over the composition of the court after its initial establishment. With arbitrators selected ad hoc by the disputants, however, each party may be free to name nearly half the panel. Some arbitration mechanisms include innovative procedures that help enhance the impartiality of the panel; for example, many agreements require the formation of a roster of potential panelists in advance of any disputes. [13]

A fourth question is which actors have standing to file complaints and obtain rulings. The tradition in international law has long been that only sovereign states have full international legal personality, according states an almost exclusive right to conclude international agreements and to bring claims regarding treaty violations. Most trade accords reflect this tradition by allowing only member states to initiate disputes. In some instances, however, standing is defined more expansively to allow treaty organizations--such as a secretariat or commission, which may have a bureaucratic interest in the treaty's effective implementation--to file official complaints against member countries for some failure to comply. [14] In other agreements even private individuals or firms, whose economic interests are most directly at stake in the context of trade policy, have standing to file complaints and require a ruling. Rather like private attorneys general, individuals with access to dispute settlement are able to ge nerate information about compliance at minimal cost to member states. Where individuals have standing, they can bring cases in one of two ways: directly, by filing a complaint with the tribunal; or indirectly, by requesting a domestic court to seek a preliminary ruling from the tribunal on any issue of relevance to the treaty. As long as national courts are willing to request preliminary rulings, the indirect route offers individuals a meaningful way to obtain supranational review of government policy. This procedure has been central to the prominent role of the European Court of Justice, as Alec Stone Sweet and Thomas Brunell demonstrate, and several other pacts--including the Central American Common Market and the Common Market of Eastern and Southern Africa--provide for preliminary references. [15] In general, the more expansive the definition of standing, the more legalistic the dispute settlement mechanism. When treaty organizations and private parties can file complaints, alleged violations are likely t o be more frequent than if standing is accorded only to states, whose multiple diplomatic considerations make them reluctant to pursue certain cases.

Finally, there is the question of remedies in cases of treaty violation. The most legalistic alternative is to give direct effect in domestic law to dispute settlement rulings made at the international level. [16] Where rulings are directly applicable, government agencies and courts have a binding obligation under national law to abide by and enforce their terms. In most instances direct effect creates a right of action in national courts, allowing individuals to invoke the treaty and file suit against the government for disregarding its international commitments. [17] Different levels or units of government may also have a similar right of action against one another. [18] Only a handful of agreements give direct effect to third-party rulings. The most prominent example is the European Union, where scholars attribute the development of the doctrine as much to a series of rulings by the European Court of Justice as to the 1957 Treaty of Rome, whose provisions on direct applicability the Court has extended inc rementally through case law. [19]

Among treaties in which rulings have no direct effect, another remedy is the authorization of retaliatory trade sanctions. Permission to impose sanctions is granted only to the complaining state, not to the community of member states for collective action. This type of decentralized enforcement system has deep roots in international law and resembles the concept of retorsion. [20] For several reasons, sanctions are not always viewed as an effective remedy in international trade, [21] but other things being equal treaties that provide for sanctions are more legalistic than those with no remedy at all, like the Organization of East Caribbean States (OECS). The specific way in which sanctions are authorized is relevant. Some accords, such as the original European Free Trade Association, require approval from a political body--usually the council of ministers--before sanctions are authorized. Depending on the decision rule in the governing body, it may be possible for the defendant to block or delay sanctions at this stage. Agreements that empower the arbitral panel or tribunal to authorize or prescribe sanctions directly are less subject to political interference and thus more legalistic. Also relevant is whether the treaty provides any guidelines or potential limits on the level of sanctions that is approved. Mechanisms that offer a blanket authorization are less legalistic than those that apply certain norms regarding the appropriate level and sectoral composition of sanctions. Because unilateral measures are always an option in the self-help international system, however, the distinction between treaties that provide for sanctions and those that do not is far less significant than the question of direct effect.

Table 1 summarizes the key features of institutional design that make a dispute settlement system more or less legalistic. This list is not comprehensive, since other issues--such as the presence or absence of deadlines or the extent to which arbitrators and judges have relevant legal expertise--can push an agreement toward one end of the spectrum or the other. [22] With these basic indicators, however, it is possible to categorize individual pacts. Even though the features in Table 1 are in theory independent of one another, they tend to cluster in practice, suggesting a hierarchical ordering of four dimensions: third-party review, third-party ruling, judges, and standing. The first question is whether the treaty provides for independent third-party review. Among pacts with some system of review, the next issue is whether rulings are directly binding in international law. Among pacts with binding rulings, those with standing tribunals are more legalistic than those with ad hoc arbitrators. Finally, tribunal s with jurisdiction over claims by individuals, treaty organs, and states alike are more legalistic than those accessible only by states. In terms of remedy, the most legalistic pacts provide rulings with direct effect in national law, but the presence or absence of sanctions--though still significant--is a less meaningful indicator of legalism, with unilateral measures always available to states seeking to enforce third-party rulings in the decentralized international system. The basic issue is how effectively a given dispute settlement mechanism is able to produce impartial, consistent, and legally binding third-party rulings on any and all alleged treaty violations.

The Argument

When negotiating a trade pact, governments must decide how legalistic its dispute settlement mechanism will be. In making this choice, political leaders confront a trade-off between mutually exclusive goals. On the one hand, they care about compliance with the agreement, the value of which depends on the extent to which other parties honor their commitments. The more legalistic the dispute settlement mechanism they design, the higher the likely level of compliance. On the other hand, they also care about their own policy discretion--and the less legalistic the mechanism, the greater their discretion to craft policies that solidify domestic support. [23] This section briefly examines each objective, assesses how the trade-off between them varies, and identifies the conditions under which legalistic dispute settlement is a likely institutional outcome.

Policy Discretion

International trade agreements pose a familiar dilemma for national political leaders motivated to remain in power. [24] Among the principal determinants of any executive's or ruling party's popularity is the state of the economy. [25] One way political leaders seek to increase growth and create jobs is to negotiate reciprocal trade agreements, which almost as a rule produce net welfare benefits. [26] The political dilemma lies in the distribution of costs and benefits. Although benefits outweigh costs in the aggregate, for consumers and producers they are diffuse, or shared in small amounts by numerous individuals, whereas costs are concentrated. In political terms, concentrated costs imply organized opposition from adversely affected groups in import-competing sectors.

Political leaders, anticipating this opposition, may use a range of strategies to facilitate reciprocal trade liberalization. They can encourage exporting firms to organize on behalf of liberalization; delegate trade policy authority to relatively insulated parts of the government; or, most important, offer compensation to groups that will bear a disproportionate share of the costs of adjustment. [27] Compensation may come in the form of side payments, special exemptions, or gradual liberalization. Such arrangements allow political leaders to reap the general benefits of liberalization while dampening the specific opposition of vulnerable domestic groups.

This generic problem of trade liberalization--diffuse net benefits, concentrated costs--is a factor in the political calculus of dispute settlement design. Political leaders cannot perfectly anticipate which groups will bear the heaviest costs of adjustment. During the negotiations, they propose specific exemptions or side payments for sectors that are clearly vulnerable to import competition. The substantive terms of a treaty, which establish the depth and pace of liberalization, usually reflect such concerns. But political leaders realize that liberalization will impose concentrated costs they cannot foresee. As a result, they want to retain the discretion to respond in the future to uncertain demands for relief from injured groups. [28] Under a legalistic dispute settlement system, political leaders who provide import protection ex post run the risk of provoking complaints from foreign trade partners that could lead to rulings of violation, with attendant reputational costs and perhaps sanctions.

In disputes over nontariff barriers, legalistic dispute settlement also threatens to compromise the autonomy of domestic officials across a range of general regulations, from health and safety standards to environmental, antitrust, and procurement policies. Historically, trading states negotiated reciprocal tariff reductions, achieving dramatic success in early GATT rounds. In recent decades, however, the principal obstacles to open trade have been nontariff barriers, domestic regulations that discriminate against foreign producers. The agendas of contemporary trade negotiations reflect this shift in the form of protection. The politics of regulation is not unlike the political economy of trade: the marginal impact of regulatory policy on small, organized groups is often disproportionately large compared to its impact on the general, unorganized public. This characteristic increases its salience to officials seeking to remain in power. With the shift to nontariff trade pacts, political leaders may now face u nprecedented complaints from foreign governments alleging unfair regulatory barriers to trade. If the merits of these complaints are judged in legalistic dispute settlement procedures, the policy discretion of political leaders may be constrained-- and in areas where the domestic political stakes, given mobilized interest groups, are high.

The threat that legalistic trade dispute settlement poses to the discretion of political leaders is threefold. First, it may constrain their ability to manage the unforeseen costs of adjustment, making it more costly to provide relief or protection to specific groups injured by trade liberalization. Second, it may limit their general policy autonomy across a range of domestic regulations, which it judges against treaty commitments to eliminate nontariff barriers to trade. A third and final consideration is that the delegation of authority to third parties may constrain their ability to pursue trade policy bilaterally, a strategy with distinct political advantages. On all three counts, political leaders in trading states are risk-averse regarding the impact of dispute settlement on policy discretion. Other things being equal, they do not want to cede veto power over domestic policies to appointed trade law experts or judges, because the political price of doing so may be high.

Treaty Compliance

If legalistic trade dispute settlement poses such a clear domestic political threat, why would trade negotiators ever consider, much less adopt, any binding procedures? The answer lies in the benefits generated by dispute settlement mechanisms that improve government compliance and instill business confidence. The very procedures that constrain the policy autonomy of public officials, giving rise to political risks, also improve the economic value of the treaty, yielding domestic political benefits. If those benefits are sufficiently large, they may offset the potential costs of policy constraints, making legalistic dispute settlement an attractive institutional option.

There are several ways in which legalistic dispute settlement is likely to enhance the level of compliance with international trade agreements. When implementing reciprocal liberalization, trading states confront what theorists of the new economics of organization describe as problems of motivation and information. [29] Each state knows its partners may be motivated at times to violate their treaty commitments in order to provide protection to domestic groups. Each state also knows that with the prevalence and complexity of nontariff barriers, it may be difficult to generate information about every instance of defection by its partners. These transactions costs may prevent states from achieving mutually beneficial gains from exchange. As neoliberal institutionalists emphasize, international institutions arise in part to mitigate such costs by providing information about violations and in some instances by enforcing commitments. [30]

Formal dispute settlement procedures serve these very functions. As official forums where complaints are filed and judged, dispute settlement mechanisms play an important role in monitoring treaty violations, helping to offset problems of information. As independent bodies with the authority to endorse sanctions against offenders, dispute settlement mechanisms also help enforce treaty commitments, mitigating problems of motivation. Trading states realize that agreements are valuable only if compliance with their terms is high. Cheating, in the form of ex post protectionism, undermines the expected benefits of free trade accords. One way to discourage defection is to craft dispute settlement mechanisms that monitor and enforce compliance. The more legalistic the mechanism--in other words, the more effectively and impartially it identifies violations and enforces third-party rulings--the higher the likely level of government compliance. [31]

In addition to monitoring and enforcing compliance, dispute settlement procedures also serve to define compliance, clarifying the meaning of the treaty in disputes over how to interpret its terms. In new economics of organization terminology, dispute settlement operates in this respect as a type of relational contract. [32] Because the parties to a trade agreement cannot foresee all possible contingencies, they find it very difficult ex ante to define compliance. The accord they negotiate is inevitably incomplete; it does not specify how the parties are to behave under all possible circumstances. As circumstances change, conflicts of interpretation may arise, potentially jeopardizing the treaty. To avoid such conflicts, parties agree in relational contracts to assign rights and responsibilities to define compliance, a role that trade accords often confer on impartial third parties. [33]

Finally, legalistic dispute settlement also improves the expected value of reciprocal trade pacts through its impact on the behavior of private traders and investors. For political leaders to realize fully the benefits of liberalization, private sector actors must believe that having committed specific assets to production for (or sales in) foreign markets, they will not be denied access to that market by new protectionist policies. Traders and investors are risk-averse with respect to decisions about investment, production, and distribution involving assets that are highly specific--in other words, assets that are costly to convert to other uses. [34] Other things being equal, they prefer minimum uncertainty, prizing a stable policy environment in which to assess alternative business strategies. [35] Legalistic dispute settlement serves as an institutional commitment to trade liberalization that bolsters the confidence of the private sector, reducing one source of risk. The private sector thus increases the volume of trade and investment among the parties, amplifying the macroeconomic--and, in turn, political--benefits of liberalization.

To summarize, legalistic dispute settlement improves the value of trade agreements through two principal channels. First, by defining, monitoring, and enforcing compliance, it constrains the opportunistic behavior of foreign governments that are tempted to provide protection to their constituents. Second, as an institutional commitment to policy stability, it promotes the confidence of the private sector, inducing traders and investors to take risks that increase the aggregate benefits of liberalization. With reduced foreign cheating and increased private sector activity, trade accords have a larger positive effect on economic factors that influence domestic political support. If legalistic dispute settlement promises to improve rates of unemployment, inflation, and growth, political leaders may very well choose to forgo policy discretion, despite the obvious risks.

Assessing the Trade-off

Political leaders negotiating the design of dispute settlement always confront this tension between policy discretion and treaty compliance. The trade-off between these objectives is universal, but not uniform. Different governments assess it in dissimilar ways. And the weight a specific government assigns to each objective changes in different settings, as does the probability that its preferred mechanism will be adopted. In specifying the dimensions of variance, it is helpful to distinguish two stages in the process of dispute settlement design. The first is national preference formation; the second, international bargaining. [36]

The level of legalism preferred by a particular government in a specific trade negotiation depends on several factors. The first is the extent to which its economy depends on trade with other signatories to the accord. The more trade-dependent the economy, measured as the ratio of intrapact exports to gross domestic product (GDP), the more legalistic the dispute settlement mechanism its government will tend to favor. Legalistic dispute settlement is more valuable politically where trade with prospective partner countries accounts for a larger share of the domestic economy.

A second source of dispute settlement preferences is relative economic power. The more powerful the country in relative terms, the less legalistic the dispute settlement mechanism its government will favor. This hypothesis derives from the distinction legal scholars have made between rule-oriented and power-oriented dispute settlement. [37] Rule-oriented systems resolve conflicts by developing and applying consistent rules to comparable disputes, enabling less powerful parties to win independent legal rulings that may be costly for more powerful parties to ignore. For small countries, the benefits of such rulings may outweigh the costs of diminished policy discretion. In power-oriented systems, parties resolve disputes through traditional diplomatic means of self-help, such as issue-linkage, hostage taking, and in particular the threat of retaliatory sanctions. [38] These strategies systematically favor more powerful countries, which tend to favor pragmatism over legalism. A telling measure of relative econo mic power within regional trade accords is each country's share of total pact GDP. The larger the country's economy in relative terms, the more influence it is likely to wield as the destination of imports from other signatories. Larger economies also tend to be less dependent on exports, giving their leaders diplomatic leverage in trade disputes. [39]

A third factor shaping dispute settlement preferences is the proposed depth of liberalization. Trade agreements come in a variety of forms, and the type of agreement at hand influences the type of dispute settlement system favored by member governments. In particular, the more ambitious the level of proposed integration, the more willing political leaders should be to endorse legalistic dispute settlement. One reason is that deeper integration promises to generate larger net economic gains. [40] A second consideration is that legalism, viewed from a functional perspective, may be the most appropriate institutional design for the resolution of disputes in the process of deep integration, which includes coverage of complex nontariff barriers to trade and common regulatory regimes. [41]

Together these simple measures--intrapact trade dependence, relative economic power, and depth of liberalization--provide a way of specifying dispute settlement preferences ex ante. To specify outcomes, one must also identify which country's preferences--given divergent ideal points on the Pareto frontier of trade cooperation [42]--should prevail at the bargaining stage. Like most international treaty negotiations, trade talks require consensus. In the presence of a unanimity rule, the design of dispute settlement is likely to be only as legalistic as the signatory that most values policy discretion and least values treaty compliance will allow. The lowest common denominator drives the institutional outcome when all parties have a unit veto.

In trade negotiations, one proxy for legalism's lowest common denominator is intrapact economic asymmetry. Its utility lies in the fact that larger economies stand to gain less, in proportional terms, from regional liberalization than smaller economies. Within a given agreement, the largest economies--defined in terms of aggregate GDP--traditionally represent the most valuable potential markets for intrapact exports. [43] Larger economies also are less dependent on and less open to trade--with openness measured either in terms of policy measures or as the ratio of trade to GDP--than smaller economies. [44] In an econometric analysis Alberto Alesina, Enrico Spolaore, and Romain Wacziarg report that the benefits of openness to trade, measured in terms of the impact on per capita GDP growth rates, diminish as aggregate GDP increases. [45] Such observations suggest that the relative value of liberalization--and, by implication, of legalistic dispute settlement--is usually lower to larger economies than to smalle r economies. The signatory state with the largest economy, therefore, is most likely to wield the unit veto that determines the level of legalism in a given agreement.

This analysis leads one to expect less legalistic dispute settlement in accords between parties whose relative economic size and bargaining leverage are highly unequal. In pacts where a single member country is much larger than its partners--in other words, where intrapact economic asymmetry is high--the regional hegemon, whose economy stands to gain least from trade liberalization, has little incentive to risk its policy discretion on behalf of improved treaty compliance. Moreover, this hegemon also has the bargaining leverage to impose its preference for a pragmatic, power-oriented system, under which it can more effectively use unilateral trade measures. In other words, size matters--and significant disparities in relative economic position augur poorly for legalism. Legalistic dispute settlement is expected only in accords among parties whose relative size and bargaining leverage are more symmetric. In settings of low economic asymmetry--provided the proposed liberalization is sufficiently deep--all memb er governments have an incentive to improve treaty compliance through the use of impartial third parties. Given their comparable economic power ex ante, no signatory stands to lose bargaining leverage ex post from the transition to a legalistic system. The projected gains from liberalization must be significant, however, if political leaders are to compromise their policy discretion. If the level of integration is not ambitious--or if the pact exempts crucial export sectors--officials may very well reject legalism even in settings of low asymmetry.

Behind my argument are several simplifying assumptions. First, the model takes as unproblematic the motivation and capacity of domestic political leaders to negotiate a trade pact. My question is not why or when nations cooperate in reciprocal trade accords, but how they do so. Second, the model also takes as exogenous the substantive terms of a trade agreement. Given a set of reciprocal concessions, it focuses on the procedures chosen by the parties to enforce those commitments. [46] This division between substance and procedure may be misguided if some systematic relationship between the two goes beyond my expectations regarding the proposed depth and relative value of liberalization. Third, the model assumes a single bargaining forum, examining the negotiation of dispute settlement procedures in isolated trade agreements. It ignores the fact that as a party to multiple accords a given country may define its preferences in one setting strategically to influence the outcome of other dispute settlement negot iations. Fourth, the model does not address the potential impact of regime type on preferences, as democratic governments may prize policy discretion more than relatively insulated authoritarian leaders. Finally, the model does not incorporate the internal logic of incremental judicialization that scholars have highlighted in cases such as the European Union. [47] Although it allows for change over time, given shifts in asymmetry or the proposed depth of integration, these factors are external to the strategic interaction of disputants and independent third parties.

The Data Set

Among advanced industrial and developing countries alike, regional trade integration has been a persistent feature of the world economy in recent decades. Counts vary, but no fewer than sixty regional trade arrangements, established through formal treaties, have come into being since 1957. [48] As the international economy began to recover from the inflationary shocks of the 1970s and debt crises of the early 1980s, the number of pacts began to increase sharply from the late 1980s onward. No continent has been spared its share of the resultant alphabet soup of acronyms, from AFTA (ASEAN Free Trade Area) in Southeast Asia to COMESA (Common Market for Eastern and Southern Africa) in Africa (see Appendix A for a list of acronyms and their definitions).

Despite the general trend toward formal economic integration, these trade pacts differ on many dimensions, the first of which is size. In terms of the number of signatories, they range from bilateral and trilateral agreements to much larger panregional accords such as the Caribbean Community (CARICOM). Second, they vary according to their members' level of economic development. Many pacts tend to fall into one of two exclusive categories: most include either industrial countries or developing countries. A third variable is the scope or depth of liberalization to which the signatories aspire. Some agreements call for little more than reduced tariffs on selected merchandise trade, whereas others aim to establish full-blown common markets or economic unions. Fourth, these accords differ widely in terms of compliance and durability. Several pacts, especially among developing countries, have collapsed or never been implemented.

With such a diverse set of possible cases, it has been necessary to apply certain criteria to ensure comparability. In this study there are no restrictions on the number of signatories, though I do exclude GAIT and the World Trade Organization--which stand alone as the world's only multilateral trade institutions--from this overview of regional accords. Similarly, there are no categorical restrictions on the type of agreement, with free trade areas, customs unions, common markets, and economic unions all represented. Finally, to minimize selection bias, the data set includes both successful and failed pacts. My focus is treaty design, not implementation, and among the covered agreements are a handful of largely inoperative pacts, such as the Commonwealth of Independent States, as well as two treaties that were formally dissolved: the 1967 East African Community and the 1973 West African Economic Community. Despite these inclusive rules, trade agreements that failed to meet one or more of the following requirements did not qualify for this study.

First, liberalization must be reciprocal. Concessions need not be strictly equivalent or simultaneous. Many of the agreements listed in Table 2 give less developed members sectoral exemptions or additional time to comply. But at least among some core signatories, reciprocal market access must be the rule. Pacts that provide for unilateral liberalization, such as the U.S. Caribbean Basin Initiative or the Australia-Papua New Guinea pact, are excluded. Where concessions are unilateral, dispute settlement is likely be driven by a logic distinct from that offered in this study of the trade-off between compliance and discretion.

Second, liberalization must be relatively comprehensive in scope. Universal free trade, with no sectoral exceptions at all, is by no means required. Still, coverage of at least merchandise trade must in principle be broad. Narrow sectoral initiatives, such as the 1951 European Coal and Steel Community or the later U.S.-Canada Automotive Agreement, fall short of this standard. Economic cooperation agreements that do not aim to achieve trade liberalization, such as the 1992 Black Sea Economic Cooperation Project, are also excluded, as are framework agreements--like the Latin American Integration Association or African Economic Community--within which specific trade pacts are negotiated. Where liberalization commitments are narrow in scope or vague and distant in time, the basic trade-off is inoperative, since domestic political leaders have little to risk and little to gain.

Third, the trade pacts must have been signed between January 1957 and December 1995. Negotiations that did not produce specific liberalization commitments by the end of 1995 are excluded. Pacts in which implementation was at that point incomplete but in which liberalization had begun are incorporated. This time frame, which opens with the creation of the European Community (EC) and closes in the first year of the World Trade Organization, covers all but the most recent agreements since World War II. The postwar era has witnessed two distinct waves of regional integration, the first in the 1960s and early 1970s and the second in the early 1990s, both of which the data set includes.

Table 2 lists the sixty-two trade agreements that met these criteria. It also lists the year in which each treaty was signed and all member governments, identifying those governments that were not among the original signatories by indicating their years of accession in parentheses. Countries that signed but later withdrew from the agreement are noted, as are their years of departure. Appendix B lists the treaties from the relevant time period that failed to meet one of the first two criteria listed earlier, as well as those whose texts were for various reasons unavailable. As Table 2 suggests, one potential problem in the data set is a lack of independence among certain cases. There are four clusters of agreements, one in the Americas and three in Europe, within which the timing and terms of the accords are rather similar. So as not to exacerbate this problem, I exclude treaties that were later encompassed or superceded by subsequent agreements; examples include the Canada--U.S. Free Trade Agreement, which t he North American Free Trade Agreement (NAFTA) supplanted, and various bilateral pacts between the EC and individual European Free Trade Association (EFTA) countries, almost all of which were replaced either by accession to the EC or by membership in the European Economic Area (EEA).

Overview of Regional Dispute Settlement

In this segment I summarize the level of legalism in each of the regional trade pacts in the data set. The basic features of dispute settlement in each pact are highlighted in Table 3, which draws on the treaty texts listed in Appendix A. Related agreements in Europe and the Americas are aggregated; within each group, dispute settlement provisions are identical in every important respect. I include two observations for EFTA, whose membership changed significantly over time (see Table 2) and whose 1960 dispute settlement system was transformed with the creation of the EEA in 1992. On all three key variables-asymmetry, proposed level of integration, and legalism--the two EFTA cases, from 1960 and 1992, differ sharply and thereby warrant separate treatment. In this respect, EFTA is an exception to the rule. There are a handful of other agreements whose dispute settlement procedures changed over time--namely the Andean Pact, Central American Common Market (CACM), Common Market of the South (MERCOSUR), AFTA, and a few bilateral EFTA agreements. Unlike EFTA, however, these cases have not undergone radical changes in membership or in other variables of interest to this study. As a result, I report and evaluate their most recent dispute settlement design (citations for the relevant agreements are listed in Appendix A).

Table 3 underscores the dramatic extent of institutional variation in the data set. Its final column organizes the agreements into five clusters that capture basic differences in the level of legalism. To define these categories, I start with the most basic question: whether a treaty provides any system of independent third-party review of disputes. For eighteen treaties, the answer is no, and they thus constitute the lowest level of legalism: none. [49] At the next level, with low legalism, are five agreements with dispute settlement mechanisms whose rulings are not binding in international law. These pacts nominally provide a system of third-party review but hold it hostage to decisions by political bodies, often a council of ministers, or in the case of the U.S.- Israel accord treat its rulings as mere recommendations. [50]

The midpoint of the sample--medium legalism--includes a diverse set of thirty-one agreements that provide for some version of standard international arbitration, offering states an automatic right to binding rulings by ad hoc arbitrators. Within this category there is variation regarding remedies, since a few pacts provide for sanctions. The only agreements with multiple dispute settlement procedures--NAFTA and several pacts signed by Chile and Mexico--also fall into this category. NAFTA includes at least five distinct mechanisms for different issue areas: general disputes (Chapter 20), unfair trade laws (Chapter 19), investment (Chapter 11), and the side accords on labor and the environment. [51] The mechanism most relevant to this study, Chapter 20 for general disputes, might qualify NAFTA at the level of low legalism because its rulings are not legally binding: compensatory payments can substitute for compliance, and disputants can reach a settlement contrary to the terms of a panel ruling after it has be en issued. However, NAFTA's innovative procedures for unfair trade law and investment disputes--which include binding rulings and standing for individuals--push the agreement in the direction of legalism. Without any standing tribunal, the combination of these mechanisms arguably leaves NAFTA at the level of medium legalism. Many of the Chilean and Mexican pacts incorporate a version of NAFTA's mechanism for investment disputes. Although this procedure grants standing to individuals, it is limited in scope to rules on investment and relies on ad hoc arbitrators, which keep the Chilean and Mexican pacts within this category.

At the level of high legalism are four agreements that establish a standing tribunal to issue binding rulings on cases brought by states. Although in other respects these pacts resemble standard arbitration, the appointment of judges to a permanent court implies a significant step in the direction of legalism. These agreements create supranational institutions whose judges are likely to issue consistent legal rulings in developing their treaty jurisprudence. In practice, these four accords are among the most poorly implemented in the data set. Both the East African Community (EAC) and the West African Economic Community (CEAO), in fact, have been formally dissolved. The Economic Community of West African States (ECOWAS) Community Court of Justice awaits the realization of trade commitments in that largely dormant economic area, while the jurisdiction of the Commonwealth of Independent States (CIS) Economic Court appears to be severely restricted even among the CIS signatories that have endorsed it. [52]

There is a sizable leap toward legalism at the final level. All five agreements with very high legalism expand the definition of standing beyond member states to include both treaty organs and private individuals. With the exception of COMESA, they also give the rulings of standing tribunals direct effect in national law. To a significant extent, the judicial bodies envisaged for the CACM, Andean Pact, EFTA 1992, and COMESA draw on the model of the European Court of Justice. For example, all five tribunals have the authority, on request, to issue preliminary rulings to national courts, which can serve to broaden the access of individuals to supranational judicial review. On encountering questions of treaty interpretation, domestic judges may or may not exercise this option, but the preliminary question procedure has helped forge important links between the European Court of Justice and national judiciaries in Europe. [53]

In summary, Table 3 locates individual treaties along the spectrum from diplomacy to legalism. Within each level of legalism, there is some variation in the details of dispute settlement procedures--for example, with regard to remedy or selecting arbitrators. Of course, there are also differences in the extent to which states have used and complied with the mechanisms in each category. Whatever the equilibrium of ex post implementation, however, Table 3 captures fundamental distinctions in ex ante institutional design that require analysis.

Measuring Asymmetry and Proposed Integration

To test my argument on the trade-off between treaty compliance and policy discretion, I must find summary statistics that describe the level of economic asymmetry and proposed depth of integration within each regional trade arrangement. Measuring GDP asymmetry in trade pacts is not unlike measuring the level of industry concentration--or market share asymmetry--in different sectors of the economy. A standard measure for industrial concentration in economics is the Herfindahl-Hirschman index (HH), which equals the sum of the squared market shares of the firms in a given industry. In a situation of pure monopoly, the index is [(1.0).sup.2] = 1.00. Where two firms divide the market evenly, HH = ([0.5).sup.2] + ([0.5).sup.2] 0.50.

In its traditional form, this index is not an ideal measure of intrapact GDP asymmetry. In the two-firm example, a score of 0.50--which is very high by antitrust standards--for me represents a situation of perfect symmetry if derived from a bilateral pact where the two countries have identical GDP shares. Yet the same index score could reflect a situation of high asymmetry in a pact with six signatories where the GDP shares are as follows: HH = [(0.68).sup.2] + [(0.17).sup.2] + [(0.10).sup.2] + [(0.02).sup.2] + [(0.02).sup.2] + [(0.01).sup.2] = 0.50. To correct for this problem, I subtract from the Herfindahl-Hirschman index what the index would be in a situation of perfect economic symmetry, where all signatories to a trade accord have identical shares of the total pact GDP. Given the nature of summed squares, this baseline of perfect symmetry always equals 1 divided by the number of signatories (N). By subtracting it, I obtain a new measure (P) that describes the proportional asymmetry of each pact. It cap tures the distance of each pact from symmetry: the further a pact is from that baseline, the higher the index. In the two-signatory example P would be zero, indicating perfect symmetry, but in the six-signatory example it would be much higher: P = 0.50 - (1/6) = 0.33.

To define this proportional asymmetry index in more formal terms,

P = [sigma][[x.sup.2].sub.i] - 1 / N for all i

where [x.sub.i] = each member's share of total pact GDP, such that [sigma][x.sub.i] = 1

Among alternative indicators of inequality, P is related to variance measures. In fact, P is formally equivalent to N times the variance of income shares. [54] In other words, P represents the sum of the squared deviation of individual GDP shares from their sample mean. One disadvantage is that the upper bound (MAX) of P, which is equivalent to 1 - 1/N, varies with the number of signatories. To control for differences in the maximum value of P, I use the ratio of the proportional asymmetry index to its range (P/MAX).

This measure, P/MAX, manages to account for differences in the number of signatories and to provide a meaningful summary statistic without compromising certain useful properties of the Herfindahl-Hirschman index. Like the Herfindahl-Hirschman index, it increases as asymmetry grows, bounded by zero at one end of its range and approaching 1 at the other, and it meets many of the criteria sought by economists for inequality measures. [55] It is invariant with respect to scale: were all individual country GDP totals to double, it would not change. It meets standard transfer tests: if some amount of GDP were transferred from a larger country to a smaller one without altering the total, it would decrease. It is not translation invariant, which is appropriate in this context: if the GDP of all countries were increased by a fixed sum, it would decrease (if nonzero) to reflect the proportionately larger gains of smaller countries. And in contrast to several measures, it is not at all invariant with respect to sample replication: if each country were to be cloned, thereby producing two identical data points for each original GDP observation, it would decrease by roughly half. [56]

To estimate the level of asymmetry within each accord, I use aggregate GDP figures denominated in U.S. dollars at current exchange rates. Where possible the index uses data from the year in which the treaty was signed. [57] For all cases, the index incorporates only countries that signed the accord at the time of its creation or reinvigoration; it excludes member states that later acceded and includes any that later withdrew. As in the summary of legalism, EFTA is the only pact to have duplicate entries, one from 1960 and the other from 1992. During this time period, thanks to the departure of the United Kingdom, the level of asymmetry in EFTA fell sharply. Other agreements that underwent various changes over time--such as the EC, which doubled in size, or the Andean Pact and CACM, which fell dormant but were later revived--hardly shifted in terms of asymmetry and thus have one entry from the year of their establishment. [58]

Using these guidelines, Table 4 ranks and organizes the sixty-three data points into two categories, low and high, based on the level of economic asymmetry within each pact. The rank order of the pacts derives from their P/MAX scores, which are listed from low to high. To facilitate comparisons, Table 4 reports the underlying GDP shares of signatories to each agreement in descending order, omitting only shares of deminimis value. These GDP shares make evident the intuitive appeal of this ordering, but with a small sample size and categorical dependent variable it is also necessary to draw a line between low and high asymmetry. Although this P/MAX index captures the level of asymmetry across all signatories, my theoretical approach suggests that the relative size of the largest members may be more important than the distribution of shares among smaller economies. The reason is that two or three symmetrically positioned regional powers that depend heavily on access to each others' markets may endorse a legalis tic system even if the gap in size between them and their neighbors is substantial. [59] By focusing on the relative size of the largest signatories, one can define a threshold between high and low asymmetry that conforms to the rank order in Table 4. For bilateral pacts, if the larger country's share of GDP exceeds 70 percent, asymmetry is high, as it is in multilateral pacts where the GDP share of the largest signatory is more than twice that of the next largest. Using these criteria to supplement the index, the line between low and high stands at a P/MAX score of.140, which separates the Romania-Slovak Republic pact from the Central African Customs and Economic Union (UDEAC). Only two cases are borderline--and in the event of conflict between the rank order and my criteria for dividing high from low asymmetry, I defer to the index. [60]

Like asymmetry, the proposed level of integration is a key variable that requires a metric. An adapted version of the traditional concept of stages of integration seems best able to capture the basic differences between shallow and deep initiatives. In a study of regional trade pacts, the International Monetary Fund labeled agreements as belonging to one of four categories [61] At the shallow end of integration arrangements are free trade areas, which remove tariff and certain nontariff barriers to cross-border trade in goods and perhaps services. More ambitious are customs unions, which in addition to free trade aim to establish harmonized external tariffs vis-a-vis nonmember countries. Common markets go a significant step beyond customs unions by guaranteeing freedom of movement not only for goods and services but also for factors of production such as capital and labor. And at the deepest level of liberalization are economic unions, which are common markets whose member states harmonize certain macroecono mic and regulatory policies.

Along the continuum of these four stages of integration, there is a fundamental break between customs unions and common markets. Free trade areas and customs unions focus on removing barriers to the cross-border movement of goods (and, at times, services), with an emphasis on tariffs and quantitative restrictions. Common markets and economic unions aim for a much higher level of integration, including the free movement of labor and capital and the harmonization of economic policies. Although certain free trade areas and customs unions may cover a range of nontariff barriers, thereby including elements of deep integration, the line between customs unions and common markets captures significant variation between low and high integration. Table 5 presents a complete list of the cases, grouped by level of legalism, with regard to treaty type. Free trade areas and customs unions indicate low integration, whereas common markets and economic unions signify high integration. This typology reflects the proposed level of integration in each agreement, not the extent of actual policy implementation.

With indicators for both asymmetry and integration, it is possible to generate a third independent variable that represents their interaction. This interaction term, of course, reflects my principal hypothesis--which is that legalism is most likely where asymmetry is low and proposed integration is high. By defining the level of proposed integration as a dummy variable, with zero for low and 1 for high, the product of the asymmetry index and integration yields a continuous interaction term. Wherever proposed integration is low, with a free trade area or customs union, the interaction term is zero. Where proposed integration is high, with a common market or economic union, the multiplicative interaction term equals the level of asymmetry, be it low or high. Table 5 below summarizes all three variables for each agreement.

Asymmetry, Proposed Integration, and Legalism

Tables 6, 7, and 8 summarize the relationship between legalism and each of the three independent variables in turn: asymmetry, proposed integration, and their interaction. To facilitate analysis of the small sample in this study, I collapse the five levels of legalism into three rows. Treaties coded as none or low legalism, none of which generate binding third-party rulings, appear together. Similarly, I combine agreements with high or very high legalism, all of which endorse the creation of a permanent court. At the level of medium legalism are treaties with binding rulings issued by ad hoc arbitrators.

With a simplified dependent variable, it is possible to use chi-squared tests of statistical significance. For all three independent variables, the null hypothesis of independence can be rejected with very high levels of confidence (p [less than] .01), suggesting a significant relationship to legalism. [62] To estimate the strength of that relationship, I also report Cramer's V, which for all three tables is relatively large (V [greater than] .5). The direction of each variable's effect on legalism is as expected: negative for asymmetry, positive for proposed integration, and negative for their interaction, reflecting the impact of asymmetry where proposed integration is high. Nevertheless, the results suggest that these variables are better predictors of legalism at its extreme values, none/low and high/very high, than at the medium level of traditional international arbitration. Even excluding the category of medium legalism, several potentially anomalous cases lie off the predicted diagonals and are shown in italics in Tables 6, 7, and 8. These cases require analysis, as do my specific hypotheses.

The first hypothesis to evaluate is whether levels of asymmetry and legalism are inversely related, given the preferences and negotiating leverage of regional hegemons. In its strongest form, the implication is that highly legalistic forms of dispute settlement should not occur in highly asymmetric settings. The evidence supports this claim, as shown in Table 6. Among the forty-seven cases of high asymmetry, there are only two examples of highly legalistic dispute settlement: the CIS and ECOWAS. Strikingly, not a single treaty in this large and diverse subset of cases has established the most legalistic form of dispute settlement, a standing tribunal to which individuals have access. All five pacts with very high legalism--the CACM, Andean Pact, EC, EFTA 1992, and COMESA--are also cases of low asymmetry. And both anomalies with high legalism, the CIS and ECOWAS--within which Russia and Nigeria, respectively, are dominant--at this point remain far from effective implementation, suggesting potential tension be tween the structure of political power in these accords and their institutional design. [63]

Where asymmetry is low, high levels of legalism are expected only where the proposed level of integration is high. The evidence supports this claim as well. Six potentially anomalous cases shown in Table 6 combine low asymmetry with low or no legalism, but all six treaties--four of which are among formerly socialist countries in Europe--aim to establish no more than a free trade area or customs union. Despite conditions of symmetry that might permit the adoption of rule-oriented dispute settlement, in these pacts governments have opted for relatively diplomatic systems. If they commit to deeper liberalization in the future, member states might endorse more legalistic dispute settlement. The adoption of a limited system of third-party review in AFTA, for example, came only after member states promised deeper cuts in tariff and nontariff barriers. Even then, political leaders in the Association of Southeast Asian Nations (ASEAN) discussed the reforms with some reluctance but reached an accord thanks in large p art to active pressure from industry representatives eager to gain secure market access. [64]

A second test is for a positive relationship between the level of proposed integration and legalism, which the evidence generally confirms, as shown in Table 7. The majority of cases with low or high legalism fall on the predicted diagonal. No mere free trade agreements or customs unions have embraced the concept of binding rulings by a standing tribunal of justices. Only where the level of proposed integration is high, in the form of a common market or economic union, have highly legalistic mechanisms been endorsed. Nevertheless, no fewer than six cases lie at the intersection of ambitious integration and low or no legalism. In all six agreements, the signatories have embraced the prospect of deep integration but rejected binding third-party review. In the EEA, Southern African Customs Union (SACU), Australia--New Zealand Closer Economic Relations Trade Agreement (ANZCERTA), and Gulf Cooperation Council (GCC), member states have even managed to achieve considerable market integration in the absence of highl y legalistic institutions--in three of these cases without any system of third-party review at all.

These anomalous combinations of high integration and low legalism share one telling attribute: all six treaties shown in italics in Table 6 are cases of high asymmetry. This structural attribute--through its impact on the domestic political economy of trade--appears to be one of the principal reasons these deep integration initiatives have not adopted correspondingly legalistic dispute settlement mechanisms. This contrast between ambitious liberalization objectives and modest institutional structure has not gone unnoticed. Scholars have explored the surprising effectiveness of ANZCERTA's thin institutional framework and criticized the arbitration procedure of MERCOSUR for being less legalistic than the aims of the treaty require. [65] An exclusive focus on the relationship between treaty type and institutional design, however, obscures the implications of the trade-off between treaty compliance and policy discretion across agreements at different levels of asymmetry.

The most robust predictor of dispute settlement design seems to be the interaction of asymmetry and proposed integration. Where the level of proposed integration is relatively low--implying a value of zero for the interaction term--not a single treaty has approved a permanent court, as noted in Table 7. By excluding those cases, Table 8 highlights the impact of asymmetry where proposed integration is high. In this subset of sixteen common markets and economic unions, the multiplicative interaction term assumes the value of the asymmetry index. Where asymmetry is high, legalism is unlikely to be high even in cases where the proposed integration is deep. At high values of the interaction term, as Table 8 indicates, very few treaties endorse binding third-party review. The CIS and ECOWAS again stand out as exceptions. Among cases with low asymmetry, legalism is likely to be high only where policy goals are ambitious and the potential value of liberalization is considerable. As Table 8 reveals, where the interac tion term is low--the most favorable conditions for legalism, according to this framework--all seven treaties have endorsed standing tribunals.

The dramatic impact of this interaction appears also in an ordered probit regression of legalism. Table 9 summarizes the results of this statistical test, which uses asymmetry and the interaction term as continuous variables that range from zero to 1, capturing more variation than the preceding tabular analysis. Proposed integration (low = 0; high = 1) and legalism (none or low = 0; medium = 1; high or very high = 2) remain categorical variables. Despite the small sample size, which is not ideal for maximum likelihood estimation, [66] both integration and the multiplicative interaction term exhibit highly significant and strong effects on legalism. [67] These effects, moreover, are in the predicted direction. The coefficient of the interaction term is the largest in magnitude, indicating the decisively negative relationship of asymmetry to legalism where the level of proposed integration is high. [68]

This simple analytical framework, tested with basic indicators of GDP concentration and treaty type, successfully accounts for thirty of the thirty-two cases at the more extreme levels of legalism, where the implications of the theory are clearest. Where treaties have endorsed standard interstate arbitration, however, it performs less well. Almost all of the cases of medium legalism (twenty-seven of thirty-one) are instances of high asymmetry and shallow integration, both of which weigh against establishing a standing tribunal. With the exception of MERCOSUR, these pacts all envision no more than free trade or a customs union, rendering the potential value of liberalization too low in the pacts with low asymmetry (OECS, Chile--Columbia, and Chile--Venezuela) to encourage highly legalistic dispute settlement. Those conditions, however, also hold for a majority of the cases with no or low legalism, making it difficult to account for that variation within the scope of my argument. Among potential explanations, one might point to the tremendous levels of asymmetry in many cases with standard arbitration mechanisms, especially the bilateral agreements negotiated by the EC and EFTA. Commitments to abide by arbitral rulings backed only by the threat of sanctions arguably mean little when EC or EFTA members account for more than 95 percent of intrapact GDP. In the Americas, the institutional homogeneity of the nine Chilean and Mexican pacts may be driven by expectations of a hemispheric free trade agreement modeled on NAFTA, whose dispute settlement provisions the Chilean and Mexican agreements resemble in several respects. [69] The prospect of accession to larger regional accords is also a factor in Europe, and it is beyond the scope of my theory.

Given the failure of my framework to account for this variation, it seems useful to assess other approaches. One alternative emphasizes the transactions costs of collective action, and in particular the variable difficulties of monitoring and enforcing compliance in trade pacts of different sizes. From this perspective, the number of signatories is a meaningful predictor of institutional form. Beth V. Yarbrough and Robert M. Yarbrough, for example, pose a distinction between self-help and third-party enforcement in international trade. [70] They contend that self-help enforcement ("bilateralism") should appear within very small groups or pairs, where continuity is valued and the strategic use of hostages might be effective. Because the efficiency costs of self-enforcement increase with the number of signatories, third-party enforcement ("minilateralism") is more likely in somewhat larger pacts, though not in multilateral agreements such as GATT. Yarbrough and Yarbrough do not restrict their analysis to the d etails of dispute settlement design; nor do they emphasize the number of signatories alone. Nevertheless, a transactions costs approach seems to account well for the pacts at the legalistic end of the spectrum. All nine highly legalistic treaties have between three and twenty-two signatories. Unfortunately, there are an equal number of comparably sized accords at the opposite end of the spectrum. No fewer than nine pacts with low or no legalism have between three and twelve signatories, which this framework would not predict. Nor can this approach account for the presence of bilateral pacts across multiple levels of legalism. Whatever the logic, there seems to be no systematic relationship in this data set between the number of signatories and legalism.

For another approach one might consider a functional account that focuses on the depth of liberalization as a rival explanation in and of itself. Where the proposed level of integration is deep, in other words, legalism may be far more likely than where integration is shallow. Variants of this functional argument are not uncommon among legal scholars who have examined the design of dispute settlement mechanisms. [71] The claim is that deep integration encourages--and may in fact require--legalistic dispute settlement, given the technical complexity of the regulatory and other nontariff barriers to trade that are the focus of recent agreements. Evaluating and interpreting arcane health, safety, and competition policies in light of treaty commitments, in this view, is an inherently legal enterprise that is best assigned to legal institutions. Moreover, the sectoral scope of liberalization in many agreements has broadened to cover new areas such as services, intellectual property, and investment. Opening market s in these areas usually involves crafting legal standards against which domestic regulations must be weighed. The implication of this functional line of reasoning is that where treaty commitments are most ambitious, legalism is most likely. In other words, as I contend, legalism and the level of proposed integration should be positively related. Preliminary evidence for this hypothesis appears in Table 7, but the functional argument by itself cannot easily account for the six anomalous cases of deep integration and low or no legalism.

Among possible explanations of these anomalies, defenders of the functional approach might point to the fact that in CARICOM and UDEAC, to name the clearest examples, integration has remained shallow in practice despite the ambitious treaty goals. Without the credible prospect of real integration, they might ask, why invest resources in a standing tribunal? The political will or capacity to achieve deep liberalization does seem to be lacking in these pacts. It is crucial to note, however, that implementation has also been problematic in many of the common markets--such as COMESA, CEAO, EAC, and ECOWAS--whose member states did elect to establish highly legalistic judicial systems for the resolution of disputes in advance of actual integration. Moreover, the European Court of Justice was in place before the 1957 Treaty of Rome and long before the vision of a European Economic Community approached reality in the last decade. [72]

This exchange points to the considerable differences in implementation between agreements with similar institutional designs. To place both the European Court of Justice and the COMESA Court of Justice at the level of very high legalism, for example, invites questions regarding what critics might term naive institutionalism. [73] My definition of legalism, in other words, might itself seem excessively legalistic in the sense that it focuses on formal procedures, not policy outcomes. The actual operation of regional pacts, however, is beyond the scope of my theory. Unlike neoliberal institutionalists, my objective in this study is not to demonstrate how institutions influence the process of regional integration. It is to highlight the political factors that account for significant variation in institutional design.


In this article I offer a political theory of dispute settlement design in international trade. My aim is to demonstrate and account for significant variation in the level of legalism across different regional accords. With a dual emphasis on economic asymmetry and the proposed depth of integration, I predict the extent to which trading states will delegate judicial review authority to impartial third parties. My central assertion is that in drafting governance structures for international trade, political leaders weigh the benefits of improved treaty compliance against the costs of diminished policy discretion. To make this judgment, they assess their economic stake in intrapact trade; their relative economic power vis-a-vis other parties to the accord; and the depth or intensity of the proposed liberalization. Thanks to their market size and lesser dependence on trade, relatively large countries tend to prefer less legalism than their smaller counterparts. Because treaties require unanimity, the institution al preferences of larger countries tend to prevail in negotiations, defining the lowest common denominator.

The implications of this approach--chief among which is that legalistic mechanisms are unlikely where asymmetry is high or integration is shallow--stand up to empirical scrutiny against a sizable set of more than sixty regional trade agreements. In almost every pact with high asymmetry, legalism is absent--even, in contrast to functional accounts, where integration is deep. Where asymmetry is low, legalism occurs only where at least a common market, and not just free trade or a uniform external tariff, is the ultimate policy objective. Despite these encouraging results, the empirical test of this theory could be improved. Case studies that trace the process and political dynamics of dispute settlement design within individual pacts would usefully supplement the cross-tabulations of this article. Moreover, the use of country- and sector-specific data regarding intrapact trade flows and barriers in case studies would allow for more refined testing.

Seen from a broad perspective, this theory of trade dispute settlement design ostensibly relies on a hybrid of neoliberal institutionalist logic and structural realist indicators of relative economic power. Unlike those systemic approaches, however, it is grounded in a political calculation of costs and benefits in the domestic arena, not in expectations about absolute or relative gains internationally. Political leaders in this model are not primarily focused on overcoming market failures or improving their defensive positions in an anarchic international system, however germane such considerations may be to the decision to pursue economic integration in the first instance. Given a regional trade initiative, negotiations over dispute settlement design in my view are driven by domestic political concerns. Without delving into the particulars of comparative politics, my analytical framework connects generic domestic political incentives to issues of international institutional design. Like recent work by Judi th Goldstein and George Downs and David Rocke on international trade governance, it bridges the steadily receding divide between comparative and international political economy. [74]

My emphasis on the details of trade dispute settlement design enables me to define specific features of procedural legalism, with potential relevance to institutional innovations in a wider set of international agreements. I neglect other governance structures--such as secretariats, commissions, and surveillance authorities--that may also help monitor and enforce compliance with trade pacts. But my exclusive focus on third-party review seems to complement recent studies of judicialization that chronicle the development of supranational legal systems over time, especially in Europe. [75] Despite their divergent conclusions regarding the extent of judicial autonomy, these investigations of the European Court of Justice all confront issues that I ignore: namely the strategic incentives and actual behavior of judges, disputing states, and nonstate litigants within particular mechanisms after their establishment.

In contrast to their focus on incremental change, my account privileges the moment of institutional creation, when member states negotiate and establish a system for the resolution of disputes. This moment need not coincide with the signing of the initial treaty. In a few pacts, such as the CACM, MERCOSUR, and AFTA, member states adopted or amended their permanent dispute settlement mechanisms well after their commitments to liberalize trade. Like asymmetry and the depth of integration, dispute settlement designs may change over time, with one blueprint substituted for another as in EFTA. Within the parameters of that design, at every level of legalism, a range of behavioral outcomes--from frequent use to utter irrelevance--are possible. Nevertheless, outcomes still remain subject to boundary conditions established by the institutional blueprint of each treaty, rendering the basic design itself worthy of investigation.

James McCall Smith is Assistant Professor of Political Science and International Affairs a t George Washington University, Washington, D.C. He can be reached at

For helpful comments I would like to thank the editors of IO, three anonymous reviewers, John Barton, Martha Finnemore, James Foster, Geoffrey Garrett, Kurt Gaubatz, Judith Goldstein, Miles Kahler, Stephen Krasner, Derek Scissors, Susan Sell, Lee Sigelman, Paul Wahlbeck, and Beth Yarbrough.

(1.) WTO 1995, 25.

(2.) On multilateralism, see Ruggie 1993. On judicialization in Europe, see Burley and Mattli 1993; Garrett 1995; and Mattli and Slaughter 1995 and 1998.

(3.) Mexico threatened to walk away from the North American Free Trade Agreement (NAFTA) over the inclusion of sanctions in the side accords. See International Trade Reporter, 18 August 1993, 1352. Canada risked its 1988 pact with the United States through its insistence on "binding" dispute settlement. See Hart 1994, 260-63, 301-302.

(4.) Yarbrough and Yarbrough concur that regional trade dispute settlement is "underexplored" in comparative terms. Yarbrough and Yarbrough 1997, 134, 139, 160. Their research on institutions for governance in international trade is a welcome exception; see, among others, Yarbrough and Yarbrough 1997, 1994, and 1992. Another significant work comparing institutions for integration is Kahler 1995.

(5.) For a survey, see Slaughter, Tulumello, and Wood 1998.

(6.) Tsoukalis 1993, 14-45.

(7.) See Garrett 1995; and Garrett, Kelemen, and Schulz 1998.

(8.) For example, Kahler notes the effectiveness of the Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) in the absence of formal governance structures. Kahler 1995,110-11.

(9.) Maggi 1996.

(10.) See Malanczuk 1997, 273-305; Merrills 1991; and Shapiro 1981.

(11.) Diverse examples include the 1969 Southern African Customs Union; the 1983 ANZCERTA; and the 1992 Central European Free Trade Agreement.

(12.) Prominent examples of this type of political oversight are the 1973 Caribbean Community (CARICOM) and the recent dispute settlement protocol of the 1992 Association of Southeast Asian Nations Free Trade Area.

(13.) Rosters formed by consensus give member governments a veto over each other's nominees, restricting the potential for strategic appointments. Rosters that are small in number tend to do the same, since disputants have fewer candidates to consider. And mechanisms that require cross-selection--where each disputant must select arbitrators named to the roster by the other or of foreign nationality--also tend to improve impartiality.

(14.) In the Andean Pact, the Junta--a panel of three technocrats who administer the treaty--has standing to file complaints of noncompliance against member states. The European Union Commission enjoys similar powers.

(15.) Stone Sweet and Brunell 1998.

(16.) The question of direct effect may depend as much on domestic constitutional norms as on the terms of the treaty. There is a vast literature on the differences between "dualist" states where international laws must undergo acts of transformation before having domestic legal force and "monist" states where treaties are directly applied. I confine my analysis to explicit treaty provisions, assuming that reciprocal treaties should not provide for direct effect where domestic constitutional norms preclude it. In any event, national courts can interpret constitutional law creatively to minimize its conflict with international treaty commitments. For example, the often "dualist" United States has been able to give direct effect to Chapter 19 rulings on antidumping and countervailing duty determinations under NAFTA essentially by regarding the international arbitral panel as if it were a federal court enforcing U.S. law. Constitutional challenges to this process have been rejected by U.S. courts. See "Court Rej ects Constitutional Challenge to NAFTA Dispute Settlement," Inside U.S. Trade, 21 November 1997.

(17.) The existence of a private right of action may also depend as much on domestic law as on specific treaty provisions. Again I restrict my analysis to the terms of the treaty. Some agreements ignore or confuse the issue, but others are clear. For example, Article 2021 of NAFTA explicitly prohibits the signatory states from allowing any private right of action under the treaty in national courts. Chapter 19 panel rulings in NAFTA are an extremely unusual exception to this rule, possible only because they enforce existing U.S. unfair trade laws.

(18.) Jackson 1992, 318, 327-28.

(19.) Weiler 1991.

(20.) Retorsion refers to lawful acts designed to injure a state that has acted illegally. See von Glahn 1996, 533-36.

(21.) Even if carefully designed, sanctions impose costs on the sanctioning country as well as on the defendant. Moreover, a system of sanctions systematically favors larger, less trade-dependent states, which are able to implement and withstand retaliatory measures with less economic dislocation than smaller, more open countries. For a general critique of sanctions, see Chayes and Chayes 1995.

(22.) The GATT panel system, for example, became more legalistic over time as disputing states appointed arbitrators with greater legal expertise and imposed certain deadlines on the review process. For an account of the system's development, see Hudec 1993.

(23.) Yarbrough and Yarbrough pose a trade-off between rigor and the opportunity for derogations that parallels the one I have drawn between treaty value and policy discretion; See Yarbrough and Yarbrough 1997, 148-49; and Smith 1995.

(24.) On the political economy of trade, see Schattschneider 1935; Pastor 1980; and Magee, Brock, and Young 1989.

(25.) See Kieweit and Rivers 1984; and Alesina and Rosenthal 1995.

(26.) Wolf 1987.

(27.) See Destler 1986; Destler and Odell 1987; Goldstein 1993; and Pastor 1980.

(28.) Downs and Rocke 1995, 77.

(29.) See Yarbrough and Yarbrough 1990; and Milgrom and Roberts 1992.

(30.) Keohane 1984.

(31.) Economists have sought to demonstrate the benefits of third-party trade dispute settlement with formal models. See Maggi 1996; and Kovenock and Thursby 1994.

(32.) Milgrom and Roberts 1992, chap. 5.

(33.) See Garrett and Weingast 1993; and Weingast 1995.

(34.) Not all assets, obviously, are specific. For a discussion, see Frieden 1991, 434-40, who builds on the pioneering work of Oliver Williamson 1985.

(35.) Not all firms prefer the certainty of stable, liberal trade policy to the prospect of future protection. Firms close to insolvency or in sectors with low productivity are likely to prefer trade policy discretion--and the increased probability of protection--to the constraints of legalistic dispute settlement.

(36.) This distinction follows Moravcsik 1993, 480-82.

(37.) For discussions of this distinction, which is also cast as "pragmatism" versus "legalism," see Dam 1970, 3-5; Hudec 1971, 1299-1300, 1304; and Jackson 1979.

(38.) Yarbrough and Yarbrough 1986.

(39.) Alesina and Wacziarg 1997.

(40.) The same logic applies to the breadth of trade pacts: where coverage is comprehensive, excluding no major export sectors, political leaders are more likely to endorse legalism than in pacts that exempt significant sectors.

(41.) For diverse studies of deep integration, see the Brookings Institution series entitled "Integrating National Economies: Promise and Pitfalls."

(42.) Krasner 1991.

(43.) For this observation to hold, per capita income levels should be comparable across member countries. Most regional trade pacts between 1957 and 1995 have been exclusively among either developed or developing countries, with NAFTA as the first of few exceptions.

(44.) Alesina and Wacziarg report a strong negative correlation between country size and openness to trade. Alesina and Wacziarg 1997. This finding is robust across multiple measures of both variables, but of particular relevance to this study is their analysis of size based on the log of aggregate GDP.

(45.) Alesina, Spolaore, and Wacziarg 1997.

(46.) This assumption of a two-stage process, with negotiations on substance preceding procedural talks, is consistent with what one observer of the Canada--U.S. pact called the "conventional trade policy view" in 1986, which was "that little could be done on dispute settlement until the shape of the agreement as a whole had become clearer." Dispute settlement without substantive rules, Canadian officials told the private sector, "was a fool's paradise." See Hart 1994, 207.

(47.) Stone Sweet 1999.

(48.) In 1994 the International Monetary Fund compiled a list of more than sixty-eight regional agreements. An earlier study listed thirty-four existing and nineteen prospective arrangements. See IMF 1994; and de la Torre and Kelly 1992.

(49.) Inclusion of the EEA in this category may be controversial. Technically, all member states of both EFTA and the EC have access to highly legalistic tribunals for the resolution of disputes regarding issues of EC law, which the EEA extends to EFTA. Nevertheless, this option applies only to disputes among EFTA states before the EFTA Court or among EC states before the European Court of Justice. For disputes between the EC and EFTA, neither group has automatic access to third-party review. By common consent, questions of interpretation of EC law may be referred to the European Court of Justice, but EFTA states have no direct access. Their complaints go instead to the EEA Joint Committee for bilateral consultations between the EC Commission and the EFTA states "speaking with one voice." The original EEA draft proposed an EEA Court, but the European Court of Justice struck it down as an usurpation of its exclusive authority over EC law. See Bierwagen and Hull 1993, 119-24.

(50.) Azrieli 1993, 203-205.

(51.) For details on NAFTA's different mechanisms, see Smith 1995.

(52.) Very little information is available, but reports suggest that the jurisdiction of the CIS Economic Court has lawfully been refused by Kazakhstan. Three CIS members have not recognized it, and others have ignored its rulings. See "CIS Court Dismisses Moldova Claim for Kazakh Grain," Reuter European Business Report, 6 February 1997; and "CIS Economic Court to Be in Session," TASS, 7 July 1997.

(53.) See Stone Sweet and Brunell 1998; and Mattli and Slaughter 1996.

(54.) The variance of a given sample (Var) is the average squared deviation of data points from their sample mean, which for income shares that sum to one is by definition 1/N: Var (x) = (1/N) . [sigma] [([x.sub.i] - 1/N).sup.2].

(55.) See Sen and Foster 1997; Cowell 1995; or Young 1985.

(56.) This attribute is helpful, for if a hegemon were matched by a rival clone, the index should fall. With a new partner of comparable size, the hegemon's cost-benefit analysis would change: it would have more to gain from secure access to a significant new market and less to lose in any move toward legalism, since its twin should be able to avail itself of power politics tactics with similar effect.

(57.) The two exceptions are the 1973 CARICOM and the 1969 SACU, both of

which reflect GDP data from 1970.

(58.) The twelve EC signatories of the Single European Act in 1987 had a P/MAX of.098, and the fifteen European Union members in 1995 had a P/MAX of .100. The index score of the CACM was .068 when the Tegucigalpa Protocol was signed in 1991, and that of the Andean Pact was .108 when the Quito Protocol was signed in 1987.

(59.) For an argument along these lines regarding the critical role of the United States and the European Union in the legalistic dispute settlement reforms of the Uruguay Round of GATT, see Smith 1998.

(60.) CARICOM is coded as high asymmetry despite the fact that the difference between Jamaica (.48) and Trinidad and Tobago (.31) in 1970 was less than a multiple of two. And the CEAO is coded as low asymmetry despite the fact that in 1973 Ivory Coast (.38) had exactly twice the GDP share of Senegal (.19).

(61.) IMF 1994, 90.

(62.) Given a sample size of sixty-three cases, the low expected frequencies of certain cells imply that the use of Pearson's chi-squared may be inappropriate. The reduced sample in Table 8 is especially problematic. For this reason I also report Fisher's exact, a more conservative test designed for small samples.

(63.) The CIS Economic Court, for example, has yet to be given effective powers. President Lukashenka of Belarus has proposed reforming the CIS tribunal on the model of the European Court of Justice. See BBC Summary of World Broadcasts SU/D3168/D, 6 March 1998. In ECOWAS, very little progress has been made on liberalization. See "Ecobank Boss Deplores Rivalry in ECOWAS," Panafrican News Agency, 6 March 1999.

(64.) A senior official reported that "strong requests" for formal dispute settlement "had come mainly from the private sector," apparently in an attempt to improve implementation. See Singapore Straits Times, 21 November 1996, 3.

(65.) On ANZCERTA, see Kahler 1995, 110-11; for MERCOSUR, see O'Neal Taylor 1996, 870. Predictably, the main obstacle to institutional reform in MERCOSUR is Brazil, by far the largest signatory. During negotiations for a permanent dispute settlement mechanism, Brazil rejected proposals by Uruguay and Argentina for a more legalistic system. See Pastori 1994, 4-7; and O'Neal Taylor 1996, 874-75.

(66.) Firm guidelines on sample size for maximum likelihood estimation do not exist, but this data set is at best borderline. Eliason notes that with fewer than five parameters to estimate, "a sample size of more than 60 is usually large enough," but Long suggests a minimum of one hundred observations. See Eliason 1993, fn. 2; and Long 1997, 54.

(67.) In maximum likelihood analysis of small samples, positive findings of significance may be more reliable than negative results. Hart and Clark report that in probit models of binary dependent variables, the risk of false positive findings does not change appreciably as sample size decreases. Hart and Clark 1999. They conclude that "the likelihood that small samples will induce Type I errors is small," in contrast to the substantial risk of false negative findings.

(68.) The analysis of interactions in maximum likelihood estimation is a topic of debate. Berry contends that when the dependent variable is latent, unbounded, and continuous--as legalism is here--interactions should be tested by directly examining the estimated coefficients of multiplicative terms. Berry 1999.

(69.) There are also notable differences: unlike Chapter 20 of NAFTA, for example, the general dispute mechanisms of the Chile and Mexico pacts provide for unambiguously binding rulings.

(70.) Yarbrough and Yarbrough 1994 and 1992.

(71.) See Reisman and Wiedman 1995, 10-11; and O'Neal Taylor 1996, 851, 870.

(72.) The European Court of Justice originally began its work in December 1952 as part of the European Coal and Steel Community. Pescatore 1992, 853. Many of its landmark decisions preceded the 1987 Single European Act. Alter 1998.

(73.) Comments of Robert O. Keohane in Kahler 1995, 135-44.

(74.) See Goldstein 1996; and Downs and Rocke 1995.

(75.) See Alter 1998; Garrett, Kelemen, and Schulz 1998; Mattli and Slaughter 1998; and Stone Sweet and Brunell 1998.


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                Institutional options in dispute settlement
                   Spectrum of legalism
Treaty provision   More diplomatic
Third-party review None                 Access controlled by
                                         political body
Third-party ruling   Recommendation     Binding if approved by
                                         political body
Judges               Ad hoc arbitrators Ad hoc panelists drawn
                                         from roster
Standing             States only        States and treaty organs
Remedy               None               Retaliatory sanctions
Treaty provision   More legalistic
Third-party review Automatic right to review
Third-party ruling Directly binding obliga-
Judges             Standing tribunal of jus-
Standing           States, treaty organs, and
Remedy             Direct effect in domestic
          Data set of selected regional tradeagreements, 1957-95
Pact                                     signed
AFTA (ASEAN Free Trade Area)              1992
Andean Pact                               1969
ANZCERTA (Australia-New Zealand           1983
   Closer Economic Relations Trade
Baltic Free Trade Agreement               1993
CACM (Central American Common             1960
CARICOM (Caribbean Community)             1973
CEAO (West African Economic Commu-        1973
   nity) (dissolved in 1994)
CEEC (Central and East European Country)
   Pacts (5)
 Bulgaria-Czech Republic Free Trade       1995
 Bulgaria-Slovak Republic Free Trade      1995
 Hungary-Slovenia Free Trade Agreement    1994
 Romania-Czech Republic Free Trade        1994
 Romania-Slovak Republic Free Trade       1994
CEFTA (Central European Free Trade        1992
Chile and Mexico Pacts (9)
  Chile-Bolivia Free Trade Agreement      1993
  Chile-Canada Free Trade Agreement       1995
  Chile-Colombia Free Trade Agreement     1993
  Chile-Ecuador Free Trade Agreement      1994
  Chile-Venezuela Free Trade Agreement    1991
  Mexico-Bolivia Free Trade Agreement     1994
  Mexico-Chile Free Trade Agreement       1991
  Mexico-Costa Rica Free Trade Agree-     1994
  Group of Three Free Trade Agreement     1994
CIS (Commonwealth of Independent States)  1993
Pact                                   Members [a]
AFTA (ASEAN Free Trade Area)           Indonesia, Malaysia, Philippines,
                                        Thailand, Brunei, Vietnam (1995),
                                        (1997), Burma (1997)
Andean Pact                            Bolivia, Colombia, Ecuador, Peru, Ven-
                                        ezuela (1973) (Chile withdrew in
ANZCERTA (Australia-New Zealand        Australia, New Zealand
   Closer Economic Relations Trade
Baltic Free Trade Agreement            Estonia, Latvia, Lithuania
CACM (Central American Common          El Salvador, Guatemala, Honduras,
   Market)                              ragua, Costa Rica (1963) (Honduras
                                        drew in 1970 but rejoined in 1990)
CARICOM (Caribbean Community)          Antigua and Bermuda, Barbados, Belize,
                                        Dominica, Grenada, Guyana, Jamaica,
                                        Montserrat, Saint Kitts and Nevis,
                                        Lucia, Saint Vincent and the
                                        Suriname (1995), Trinidad and Tobago
                                        (Bahamas is a member of the
                                        but not of the Common Market)
CEAO (West African Economic Commu-     Benin, Burkina Faso, Ivory Coast,
   nity) (dissolved in 1994)            Mauritania, Niger, Senegal
CEEC (Central and East European
   Pacts (5)
 Bulgaria-Czech Republic Free Trade    Bulgaria, Czech Republic
 Bulgaria-Slovak Republic Free Trade   Bulgaria, Slovak Republic
 Hungary-Slovenia Free Trade Agreement Hungary, Slovenia
 Romania-Czech Republic Free Trade     Romania, Czech Republic
 Romania-Slovak Republic Free Trade    Romania, Slovak Republic
CEFTA (Central European Free Trade     Czech Republic, Hungary, Poland,
   Agreement)                           Slovenia (1996), Romania (1997)
Chile and Mexico Pacts (9)
  Chile-Bolivia Free Trade Agreement   Chile, Bolivia
  Chile-Canada Free Trade Agreement    Chile, Canada
  Chile-Colombia Free Trade Agreement  Chile, Colombia
  Chile-Ecuador Free Trade Agreement   Chile, Ecuador
  Chile-Venezuela Free Trade Agreement Chile, Venezuela
  Mexico-Bolivia Free Trade Agreement  Mexico, Bolivia
  Mexico-Chile Free Trade Agreement    Mexico, Chile
  Mexico-Costa Rica Free Trade Agree-  Mexico, Costa Rica
  Group of Three Free Trade Agreement  Colombia, Mexico, Venezuela
CIS (Commonwealth of Independent       Russia, Armenia, Azerbaijan, Armenia,
                                        Belarus, Georgia, Kazakhstan, Kyr-
                                        gyzstan, Moldova, Tajikistan,
                                        Uzbekistan (Ukraine is a full
                                        member of the CIS but an associate
                                        member of the Economic Union)
COMESA (Common Market for Eastern and   1993
   Southern Africa)
EAC (East African Community) (collapsed 1967
   in 1977; dissolved in 1984)
EC (European Community)                 1957
EC Associations (12)
  EC-Bulgaria Association Agreement     1993
  EC-Cyprus Association Agreement       1972
  EC-Czech Republic Association Agree-  1991
  EC-Estonia Free Trade Agreement       1994
  EC-Hungary Association Agreement      1991
  EC-Poland Association Agreement       1991
  EC-Romania Association Agreement      1993
  EC-Slovak Republic Association Agree- 1991
  EC-Thrkey Customs Union               1963
  EC-Latvia Free Trade Agreement        1994
  EC-Lithuania Free Trade Agreement     1994
  EC-Malta Association Agreement        1970
EC-Israel Free Trade Agreement          1995
ECOWAS (Economic Community of West      1975
   African States) (revised in 1993)
EEA (European Economic Area)            1992
EFTA (European Free Trade Association)  1960
EFTA Agreements (12)
  EFTA-Bulgaria Agreemeat               1993
  EFTA-Czech Republic Agreement         1992
  EFTA-Estonia Agreement                1995
  EFTA-Hungary Agreement                1993
  EFTA-Israel Agreement                 1992
  EFTA-Latvia Agreement                 1995
COMESA (Common Market for Eastern and  Angola, Burnundi, Comoros, Djibouti,
   Southern Africa)                     trea, Ethiopia, Kenya, Lesotho,
                                        gascar, Malawi, Mauritius,
                                        Namibia, Rwanda, Somalia, Sudan,
                                        Swaziland, Tanzania, Uganda, Zaire
                                        (1994), Zambia, Zimbabwe (Seychelles
                                        signed the treaty but does not
EAC (East African Community)           Kenya, Tanzania, Uganda
   in 1977; dissolved in 1984)
EC (European Community)                Austria (1995), Belgium, Denmark
                                        Finland (1995), France, Germany,
                                        (1981), Ireland (1973), Italy,
                                        bourg, Netherlands, Portugal (1986),
                                        Spain (1986), Sweden (1995), United
                                        Kingdom (1973)
EC Associations (12)
  EC-Bulgaria Association Agreement    EC, Bulgaria
  EC-Cyprus Association Agreement      EC, Cyprus
  EC-Czech Republic Association Agree- EC, Czech Republic
  EC-Estonia Free Trade Agreement      EC, Estonia
  EC-Hungary Association Agreement     EC, Hungary
  EC-Poland Association Agreement      EC, Poland
  EC-Romania Association Agreement     EC, Rumania
  EC-Slovak Republic Association       EC, Slovak Republic
  EC-Thrkey Customs Union              EC, Turkey
  EC-Latvia Free Trade Agreement       EC, Latvia
  EC-Lithuania Free Trade Agreement    EC, Lithuania
  EC-Malta Association Agreement       EC, Malta
EC-Israel Free Trade Agreement         EC, Israel
ECOWAS (Economic Community of West     Benin, Burkina Faso, Cape Verde,
   African States) (revised in 1993)    Ghana, Guinea, Guinea-Bissau, Ivory
                                        Coast, Liberia, Mali, Mauritania,
                                        Nigeria, Senegal, Sierra Leone, Togo
EEA (European Economic Area)           EC, Iceland, Liechtenstein, Norway
                                        voters rejected the EEA in 1992;
                                        Finland, and Sweden joined EC in
EFTA (European Free Trade Association) Iceland (1970), Liechtenstein (1991),
                                        Norway, Switzerland (United Kingdom
                                        and Denmark withdrew in 1973;
                                        in 1986; Austria, Finland (1986),
                                        Sweden in 1994)
EFTA Agreements (12)
  EFTA-Bulgaria Agreemeat              EFTA, Bulgaria
  EFTA-Czech Republic Agreement        EFTA, Czech Republic
  EFTA-Estonia Agreement               EFTA, Estonia
  EFTA-Hungary Agreement               EFTA, Hungary
  EFTA-Israel Agreement                EFTA, Israel
  EFTA-Latvia Agreement                EFTA, Latvia
  EFTA-Lithuania Agreement                   1995
  EFTA-Poland Agreement                      1992
  EFTA-Romania Agreement                     1992
  EFTA-Slovak Republic Agreement             1992
  EFTA-Slovenia Agreement                    1995
  EFTA-Turkey Agreement                      1991
GCC (Gulf Cooperation Council)               1981
Mano River Union                             1973
MERCOSUR (Common Market of the South)        1991
NAFTA (North American Free Trade Agreement)  1992
OECS (Organization of East Caribbean States) 1981
SACU (Southern African Customs Union)        1969
U.S.-Israel Free Trade Agreement             1985
UDEAC (Central African Customs and Economic  1964
  EFTA-Lithuania Agreement             EFTA, Lithuania
  EFTA-Poland Agreement                EFTA, Poland
  EFTA-Romania Agreement               EFTA, Romania
  EFTA-Slovak Republic Agreement       EFTA, Slovak Republic
  EFTA-Slovenia Agreement              EFTA, Slovenia
  EFTA-Turkey Agreement                EFTA, Turkey
GCC (Gulf Cooperation Council)         Babrain, Kuwait, Oman, Qatar, Saudi
                                        Arabia, United Arab Emirates
Mano River Union                       Liberia, Sierra Leone, Guinea (joined
MERCOSUR (Common Market of the South)  Argentina, Brazil, Paraguay, Uruguay
                                        and Bolivia are associate members)
NAFTA (North American Free Trade       Canada, Mexico, United States
OECS (Organization of East Caribbean   Antigua and Bermuda, Dominica,
States)                                 Grenada,
                                        Montserrat, Saint Kitts and Nevis,
                                        Lucia, Saint Vincent and the
SACU (Southern African Customs Union)  Botswana, Lesotho, Namibia, South
U.S-Israel Free Trade Agreement        Israel, United States
UDEAC (Central African Customs and     Cameroon, Central African Republic,
Economic                                Chad,
  Union                                 Republic of Congo, Gabon, Equatorial
(3.)Dates in parentheses indicate years of accession for member
states that were not among the original signatories. Countries
that signed but later withdrew from the agreement are also noted,
as are their years of departure.
            Levels of legalism in dispute settlement design [a]
                               Treaty provision
Pact                           Third-party review
ANZCERTA                       None
Baltic FTA                     None
CEEC Pacts (5)                 None
CEFTA                          None
EEA                            None--unless by mutual
                                 consent to ECJ on EC
EFTA agreements with Czech     None
  Republic, Hungary,
  Poland, Romania, Slovak
  Republic, and Turkey
Mano River Union               None
SACU                           None
UDEAC                          None
AFTA                           Yes--automatic
CARICOM                        Yes--automatic
EFTA 1960                      Yes--but only by majority
                                 vote of Council
GCC                            Yes--but only by vote of
U.S.--Israel Pact              Yes--automatic
Chile and Mexico Pacts [b] (9) Yes--automatic
EC associations (12)           Yes--but risk of deadlock a
                                 panel formation
Pact                                Third-party ruling          Judges
ANZCERTA                                    --                    --
Baltic FTA                                  --                    --
CEEC Pacts (5)                              --                    --
CEFTA                                       --                    --
EEA                                         --                    --
EFTA agreements with Czech                  --                    --
  Republic, Hungary,
  Poland, Romania, Slovak
  Republic, and Turkey
Mano River Union                            --                    --
SACU                                        --                    --
UDEAC                                       --                    --
AFTA                           Not binding (ministers "con- Ad hoc--roster
                                 sider" report in vote)
CARICOM                         Not binding (Council "may"  Ad hoc--roster
                                  vote to recommend)
EFTA 1960                       Not binding (Council "may"  Ad hoc
                                  vote to recommend)
GCC                             Not binding (panel issues   Ad hoc--roster
                                  recommendation to
                                  Supreme Council)
U.S.--Israel Pact               Not binding (merely a con-  Ad hoc
                                  cilation report)
Chile and Mexico Pacts [b] (9)           Binding            Ad hoc--roster
EC associations (12)                     Binding            Ad hoc
Pact                             Standing               Remedy
ANZCERTA                            --                    --
Baltic FTA                          --                    --
CEEC Pacts (5)                      --                    --
CEFTA                               --                    --
EEA                                 --                    --
EFTA agreements with Czech          --                    --
  Republic, Hungary,
  Poland, Romania, Slovak
  Republic, and Turkey
Mano River Union                    --                    --
SACU                                --                    --
UDEAC                               --                    --
AFTA                            States only  Compensation, sanctions (only
                                               by vote of Council)
CARICOM                         States only   Sanctions (only by vote of
EFTA 1960                       States only   Sanctions (only by vote of
GCC                             States only  None
U.S.--Israel Pact               States only   Sanctions ("any appropriate
Chile and Mexico Pacts [b] (9)  States only   Sanctions (if prescribed or
EC associations (12)           States and EC  None
                               Level of
Pact                           legalism
ANZCERTA                         None
Baltic FTA                       None
CEEC Pacts (5)                   None
CEFTA                            None
EEA                              None
EFTA agreements with Czech       None
  Republic, Hungary,
  Poland, Romania, Slovak
  Republic, and Turkey
Mano River Union                 None
SACU                             None
UDEAC                            None
AFTA                             Low
CARICOM                          Low
EFTA 1960                        Low
GCC                              Low
U.S.--Israel Pact                Low
Chile and Mexico Pacts [b] (9)  Medium
EC associations (12)            Medium
EC--Israel Pact               Yes--but risk of deadlock at
                                panel formation
EFTA agreements with Bul-     Yes--automatic
  garia, Israel, Estonia,
  Latvia, Lithuania, sod Slo-
MERCOSUR                      Yes--but only after three
                                preliminary reviews
NAFTA                         Yes--automatic (except in
                                side accords, where two
                                of three states must
                                approve review)
OECS                          Yes--automatic
CEAO                          Yes--automatic
CIS                           Yes--but jurisdiction limited
EAC                           Yes--automatic
ECOWAS                        Yes--automatic
Andean Pact                   Yes--automatic
CACM                          Yes--automatic
COMESA                        Yes--automatic
EC                            Yes--automatic
EFTA 1992                     Yes--automatic
EC--Israel Pact               Binding
EFTA agreements with Bul-     Binding
  garia, Israel, Estonia,
  Latvia, Lithuania, sod Slo-
MERCOSUR                      Binding
NAFTA                         Chap. 20 general disputes: not
                                binding (contrary settle-
                                ment or compensation
                              Chap. 19 unfair trade law and
                                Chap. 11 investment dis-
                                putes: binding
                              Side accords on labor and
                                environment: binding
OECS                          Binding
CEAO                          Binding
CIS                           Binding
EAC                           Binding
ECOWAS                        Binding
Andean Pact                   Binding
CACM                          Binding
COMESA                        Binding
EC                            Binding
EFTA 1992                     Binding
EC--Israel Pact               Ad hoc            States and EC
EFTA agreements with Bul-     Ad hoc            States only
  garia, Israel, Estonia,
  Latvia, Lithuania, sod Slo-
MERCOSUR                      Ad hoc--roster    States only
NAFTA                         Ad hoc--roster    Chap. 20: states only
                                                Chap. 11: individuals only
                                                Chap. 19 and side accords:
                                                  states and individuals
OECS                          Ad hoc--roster    States only
CEAO                          Standing tribunal States only
CIS                           Standing tribunal States only
EAC                           Standing tribunal States only
ECOWAS                        Standing tribunal States and treaty organs
Andean Pact                   Standing tribunal States, treaty organs, and
CACM                          Standing tribunal States, treaty organs, and
COMESA                        Standing tribunal States, treaty organs, and
EC                            Standing tribunal States, treaty organs, and
EFTA 1992                     Standing tribunal States, treaty organs, and
EC--Israel Pact               None                           Medium
EFTA agreements with Bul-     None                           Medium
  garia, Israel, Estonia,
  Latvia, Lithuania, sod Slo-
MERCOSUR                      Sanctions                      Medium
NAFTA                         Chap. 20: sanctions            Medium
                              Chap. 11 and Chap. 19: direct
                              Side accords: fines (direct
                                effect for Canada)
OECS                          None                           Medium
CEAO                          None                           High
CIS                           None                           High
EAC                           None                           High
ECOWAS                        Sanctions (imposed by heads    High
                                of state)
Andean Pact                   Direct effect, sanctions (pre- Very High
                                scribed by tribunal)
CACM                          Direct effect                  Very High
COMESA                        Sanctions (prescribed by tri-  Very High
EC                            Direct effect                  Very High
EFTA 1992                     Direct effect                  Very High
Sources: See Appendix A.
(a.)Boldface indicates the distinguishingfeatures of cases
at levels aboveand below medium legalism.
(b.)Several of the Chilean and Mexican pactsalso include
investor-state disputemechanisms, rather likeChapter 11 of NAFTA.
               The proportional asymmetry index of intrapact
                                GDP shares
Asymmetry Pact                      Year
Low       Mano River Union          1973
          EAC                       1967
          Romania-Czech Republic    1994
          Chile-Colombia            1993
          Bulgaria-Slovak Republic  1995
          COMESA                    1993
          Baltic FTA                1993
          OECS                      1981
          Chile--Venezuela          1991
          CACM                      1960
          AFTA                      1992
          EFTA 1992                 1992
          Andean Pact               1969
          CEAO                      1973
          EC                        1957
          Romania-Slovak Republic   1994
High      UDEAC                     1964
          CEFTA                     1992
          Hungary-Slovenia          1994
          Chile-Ecuador             1994
          CARICOM                   1970
          Bulgaria-Czech Republic   1995
          EFTA 1960                 1960
          MERCOSUR                  1991
          GCC                       1981
          Group of Three            1994
          ECOWAS                    1975
          ANZCERTA                  1983
          CIS                       1993
          Mexico-Chile              1991
          Chile-Canada              1995
          Chile-Bolivia             1993
          NAFTA                     1992
          EEA                       1992
          EFTA Agreements (mean)   Various
          Mexico-Costa Rica         1994
          Mexico-Bolivia            1994
          SACU                      1970
          EC-Israel                 1995
          U.S.-Israel               1985
          EC Associations (mean)   Various
Asymmetry GDP shares (x)                               N       P   P/MAX
Low       .52, .48                                     2     .0007 .001
          .38, .34, .28                                3     .005  .007
          .545, .455                                   2     .004  .008
          .55, .45                                     2     .005  .010
          .57, .43                                     2     .011  .021
          .11, .10, .10, .08, .07, .07, .06, .06,     22     .023  .024
             .06, .05, .05, .04 and below
          .45, .31, .23                                3     .025  .037
          .26, .22, .14, .12, .12, .10, .05            7     .032  .037
          .61, .39                                     2     .024  .048
          .38, .23, .19, .12, .08                      5     .053  .067
          .34, .27, .14, .13, .12, .01                 6     .068  .082
          .27, .26, .20, .14, .12, .01, .002           7     .073  .085
          .34, .28, .27, .07, .04                      5     .072  .089
          .38, .19, .14, .09, .08, .08, .05            7     .076  .089
          .36, .33, .18, .07, .06, .003                6     .113  .136
          .69, .31                                     2     .069  .138
High      .47, .16, .14, .13, .09, .01                 6     .124  .149
          .53, .23, .17, .07                           4     .112  .149
          .74, .26                                     2     .118  .235
          .77, .23                                     2     .134  .268
          .48, .31, .09, .05, .02, .01 and            12     .252  .275
          .79, .21                                     2     .162  .325
          .63, .12, .07, .05, .05, .04, .02            7     .281  .328
          .65, .32, .02, .01                           4     .278  .371
          .67, .14, .11, .04, .03, .01                 6     .313  .376
          .75, .13, .12                                3     .261  .392
          .72, .07, .05, .04, .02 and below           15 [a] .458  .491
          .88, .12                                     2     .293  .586
          .79, .06, .05, .04, .01 and below           11     .540  .594
          .89, .11                                     2     .311  .622
          .89, .11                                     2     .311  .622
          .89, .11                                     2     .311  .622
          .87, .08, .05                                3     .430  .645
          .91, .09                                     2 [b] .338  .676
          .96, .04                                     2 [b] .421  .841
          .98, .02                                     2     .458  .916
          .99, .01                                     2     .472  .944
          .984, .007, .005, .004                       4     .718  .957
          .99, .01                                     2 [b] .479  .958
          .99, .01                                     2     .487  .974
          .99, .01                                     2 [b] .490  .980

Sources: World Bank (various years); OECD (various years); and UN Statistical Yearbook (various years).

Note: Shares of GDP may not sum to 1 or match the index scores exactly because of rounding.

GDP shares = members' GDP shares ([x.sub.i]) (in current $US) in reported year.

P = [sigma] [[x.sup.2].sub.i] - 1/N for all i where [x.sub.i] is member i's share of total pact GDP such that [sigma] [x.sub.i] = 1.

MAX = 1 - 1/N, the upper bound of P for each pact.

N = number of members at the time the agreement was signed.

(a.) GDP data for Guinea were unavailable.

(b.) Member states of the EC and/or EFTA act collectively as a unit in a bilateral governance structure.
           Legalism, asymmetry, and proposed level of integration
Legalism          Pact                     Asymmetry
None or low       SACU                       High
                  UDEAC                      High
                  ANZCERTA                   High
                  EEA                        High
                  CARICOM                    High
                  GCC                        High
                  EFTA-Israel                High
                  EFTA-Bulgaria              High
                  EFTA-Estonia               High
                  EFTA-Latvia                High
                  EFTA-Lithuania             High
                  EFTA-Slovenia              High
                  Hungary-Slovenia           High
                  Bulgaria-Czech Republic    High
                  U.S.-Israel                High
                  EFTA 1960                  High
                  Baltic FTA                  Low
                  CEFTA                       Low
                  Romania-Czech Republic      Low
                  Bulgaria-Slovak Republic    Low
                  Romania-Slovak Republic     Low
                  Mano River Union            Low
                  AFTA                        Low
Medium            MERCOSUR                   High
                  EC-Iarael                  High
                  EC Associations (12)       High
                  EFTA-Czech Republic        High
                  EFTA-Poland                High
                  EFTA-Hungary               High
                  EFTA-Romania               High
                  EFTA-Slovak Republic       High
                  EFTA-Turkey                High
                  NAFTA                      High
                  Chile-Ecuador              High
                  Group of Three             High
                  Mexico-Chile               High
                  Chile-Canada               High
                  Chile-Bolivia              High
                  Mexico-Costa Rica          High
                  Mexico-Bolivia             High
                  OECS                        Low
                  Chile-Colombia              Low
                  Chile-Venezuela             Low
High or very high CIS                        High
                  ECOWAS                     High
                  CEAO                        Low
                  COMESA                      Low
                  EAC                         Low
                  CACM                        Low
                  Andean Pact                 Low
                  EC                          Low
                  EFTA 1992                   Low
Legalism             Integration            Interaction
None or low       High--common market          High
                  High--economic union         High
                  High--common market [a]      High
                  High--common market          High
                  High--common market          High
                  High--common market          High
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--customs union           Zero
                  Low--free trade area         Zero
Medium            High--common market          High
                  Low--free trade area         Zero
                  Low--free trade areas [b]    Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
                  Low--customs union           Zero
                  Low--free trade area         Zero
                  Low--free trade area         Zero
High or very high High--economic union         High
                  High--common market          High
                  High--economic union          Low
                  High--common market           Low
                  High--common market           Low
                  High--common market [c]       Low
                  High--common market           Low
                  High--economic union          Low
                  High--common market           Low

Sources: For treaty type, see IMF 1994, app. I; and WTO 1995.

(a.) IMF (1994) codes ANZCERTA as a free trade sees, but because it has achieved labor mobility, full coverage of services, and a competition policy, it is much more like a common market--or, given the extent of legal harmonization, an economic union. See Kahler 1995, 109-11.

(b.) The EC-Turkey agreement is a customs union.

(c.) IMF (1994) codes the CACM as a customs union. The members had accomplished little more than a customs union at that point, but the aim of the treaty--as the name implies--is clearly to establish a common market.
                        Legalism and asymmetry [a]
                  Level of economic asymmetry
Level of legalism Low                         High                 Total
High or very high                                                    9
                  CACM                        CIS
                  Andean Pact                 ECOWAS
                  EFTA 1992
Medium                                                              31
                  OECS                        MERCOSUR
                  Chile-Colombia              Mexico Pacts (4)
                  Chile-Venezuela             Chile-Bolivia
                                              EC Associations (12)
                                              EFTA-Czech Republic
                                              EFTA-Slovak Republic
Low or none                                                         23
                  Baltic FTA                  CARICOM
                  Romania--Czech Republic     U.S.-Israel
                  Bulgaria--Slovak Republic   EFTA 1960
                  Romania--Slovak Republic    EFTA-Israel
                  AFTA                        EFTA-Bulgaria
                  Mano River Union            EFTA-Estonia
Total             16                          47                    63
Note: P ([X.sup.2][2] [greater than] 17.08) =0.000.
Fisher's exact = 0.000.
Cramer's V = .52.
(a.)Cases that llie off the predicted diagonal
at high and low levels of legalism are shown in
                       Legalism and integration [a]
                  Level of proposed integration
Level of legalism Low                           High        Total
High or very high                                             9
                  None                          CACM
                                                Andean Pact
                                                EFTA 1992
Medium                                                       31
                  OECS                          MERCOSUR
                  Chile and Mexico Pacts (9)
                  EC Associations (12)
                  EFTA-Czech Republic
                  EFTA-Slovak Republic
Low or none                                                  23
                  U.S.-Israel                   CARICOM
                  AFTA                          EEA
                  Mano River Union              SACU
                  Romania-Czech Republic        ANZCERTA
                  Bulgaria-Czech Republic       GCC
                  Romania-Slovak Republic       UDEAC
                  Bulgaria-Slovak Republic
                  EFTA 1960
                  Baltic FTA
Total             47                            16           63
Note: P ([X.sup.2][2] [greater than] 34.49)= 0.000.
Fisher's exact = 0.000.
Cramer's V = 0.74.
(a.)Cases that lie off the predicted diagonal at
at high and low levels of legalism are shown in
       Legalism and the interaction of asymmetry and integration [a]
                  Interactive of economic asymmetry
                      and proposed integration
Level of legalism Low                               High     Total
High or very high                                              9
                  CACM                              CIS
                  Andean Pact                       ECOWAS
                  EFTA 1992
Medium            None                              MERCOSUR   1
Low or none       None                                         6
Total             7                                 9         16
Note: P([X.sup.2][2] [greater than] 9.68 = 0.008
Fisher's exact = 0.004.
Cramer's V = 0.78.
(a.)Cases where the interaction term is zero have been omitted
to capture the impact of asymmetry where proposed integration
is high. Cases that lie off the predicted diagonal at high
and low levels of legalism are shown initalics.
                   Ordered probit regression of legalism
Variable               Coefficient Standard error
Proposed integration   3.203 [**]      0.682
Economic asymmetry      1.067 [*]      0.484
Interaction            -5.604 [**]     1.483
Number of observations   63
Log likelihood         -49.59
Chi-squared             26.16
Significance             0.000
(**.)p [less than] .01, two-tailed test.
(*.)p [less than] .05, two-tailed test.

Appendix A: Sources for Treaty Texts

The date following the treaty title indicates the year the treaty was published. The original signing date for each treaty can be found in Table 2.

AFTA (ASEAN Free Trade Area). 1992. International Legal Materials 31:506.

Protocol on Dispute Settlement Mechanism, available from the ASEAN Secretariat or online at [less than][greater than].

Andean Pact. 1979. Treaty Creating the Court of Justice of the Cartagena Agreement. International Legal Materials 18:1203.

Statute of the Court of Justice of the Cartagena Agreement, available from the Organization of American States or online at [less than][greate r than].

ANZCERTA (Australia-New Zealand Closer Economic Relations Trade Agreement). 1983. International Legal Materials 22:945.

Baltic Free Trade Agreement. Available from the foreign ministries of member states.

CACM (Central American Common Market). 1994. Basic Documents of International Economic Law 2:529.

Statute of the Central American Court of Justice. 1995. International Legal Materials 34:921.

CARICOM (Caribbean Community). 1974. United Nations Treaty Series 946:17. New York: UN.

CEAO (West African Economic Community). 1981. United Nations Treaty Series 1257:362. New York: UN.

CEEC (Central and East European Country) Pacts. Available online at [less than][greater than].

CEFTA (Central European Free Trade Agreement). 1995. International Legal Materials 34:3.

Chile and Mexico Pacts. Available from the Organization of American States or online at [less than][greater than].

CIS (Commonwealth of Independent States). 1995. International Legal Materials 34:1279.

COMESA (Common Market for Eastern and Southern Africa). 1994. International Legal Materials 33:1067.

EAC (East African Community). 1967. International Legal Materials 6:932.

EC (European Community). Agreement Establishing the European Economic Community and Protocol on the Statute of the Court of Justice of the EEC. 1958. United Nations Treaty Series 298:11, 147. New York: UN.

EC Associations. Available in Official Journal of the European Communities, or online at [less than][greater than].

EC-Israel. 1996. Official Journal of the European Communities 39:1-11.

ECOWAS (Economic Community of West African States). 1975. International Legal Materials 14:1200.

Revised Treaty. 1996. International Legal Materials 35:660.

Protocol A/P.1/7/91 on the Community Court of Justice. 1996. Revue Africaine de Droit International et Compare 8:228.

EEA (European Economic Area). 1993. Common Marker Law Reports 29:1247.

EFTA (European Free Trade Association). 1960. United Nations Treaty Series 370:5. New York: UN.

EFTA. 1994. Official Journal of the European Communities 37:1-83.

EFTA Associations. Available online at [less than][gre ater than].

GCC (Gulf Cooperation Council). 1987. International Legal Materials 26:1131.

Mano River Union. 1974. United Nations Treaty Series 952:264. New York: UN.

MERCOSUR (Common Market of the South). 1991. International Legal Materials 30:1041.

Protocol of Brasilia for the Settlement of Disputes. 1997. International Legal Materials 36:691.

Ouro Preto Protocol, available from the Organization of American States or online at [less than][greater than].

NAFTA (North American Free Trade Agreement). 1993. International Legal Materials 32:605.

OECS (Organization of East Caribbean States). 1981. International Legal Materials 20:1166.

SACU (Southern African Customs Union). 1973. United Nations Treaty Series 860:69. New York: UN.

U.S.-Israel. 1985. International Legal Materials 24:654.

UDEAC (Central African Customs and Economic Union). 1964. International Legal Materials 4:699.

Appendix B: Excluded Regional Economic Agreements, 1957-95

This list draws largely on de la Torre and Kelly 1992; IMF 1994; and WTO 1995. These sources also include pacts that were superceded by subsequent agreements included in Table 2 or listed here.

Nonreciprocal Agreements

U.S. Caribbean Basin Initiative

EC Lome Conventions with African, Caribbean, and Pacific States

EC Cooperation Agreements with Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia

EFTA Cooperation Agreements with Albania, Egypt, and Tunisia

1976 Australia-Papua New Guinea Trade and Commercial Relations Agreement

1980 South Pacific Regional Trade and Economic Agreement

1991 CARICOM-Venezuela Agreement

1991 CARICOM-Colombia Agreement

Cooperation or Framework Agreements

1976 Economic Community of the Great Lakes Countries

1980 Latin American Integration Association

1983 Economic Community of Central African States

1984 Indian Ocean Commission

1985 Economic Cooperation Organization

1985 South Asian Association for Regional Cooperation (signed limited preferential trade pact in 1993)

1989 Asia Pacific Economic Cooperation Forum

1991 African Economic Community

1992 Southern African Development Community (signed free trade agreement in 1996)

1992 Black Sea Economic Cooperation Project

1994 Association of Caribbean States

1994 Free Trade Area of the Americas

Unavailable Agreements

1961 Borneo Free Trade Area

1962 African Common Market

1964 Arab Common Market

1975 Bangkok Agreement

1989 Arab Maghreb Union

1991 Thailand-Lao People's Democratic Republic Trade Agreement

1992 Slovak Republic-Czech Republic Customs Union

1993 Slovenia-Czech Republic Free Trade Agreement

1993 Slovenia-Slovak Republic Free Trade Agreement

1994 Kazakhstan-Kyrgyz Republic-Uzbekistan Customs Union

1994 Economic and Monetary Community of Central Africa (renewal of moribund 1964 UDEAC)

1994 West African Economic and Monetary Union (successor to dissolved 1973 CEAO)
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