I Can Has International Trade Arbitration Organization?

My last post had me thinking about a problem that’s been plaguing trade agreements for a while. The unfortunate fact of the matter is that the Doha Round is stuck, and unlikely to produce an agreement for a good while. In the interregnum, the US and countless other states are going to want to substitute bilateral agreements for global ones. But whereas the WTO has a powerful court system and strong punitive capabilities, the vast majority of trade agreements lack real mechanisms for making sure, say, labor rights or IP protection standards are being upheld. For example, when the US imposed a huge steel tariff in 2002, the WTO was able to authorize the EU to threaten retaliatory measures and force the US to back down. But if Mexico were to start allowing child labor, there’s no NAFTA court with the power to punish it, only panels capable of condemning it. What’s clearly needed is some group which would determine if a state is cheating on a trade agreement, and which, if the state is found guilty, would have the power to authorize the cheated-upon state to instate punitive tariffs.
One solution would be to set up a new court with every trade agreement to ensure its enforcement, with judges approved by both sides. This court would have the advantage of being staffed with experts on the particular trade agreement, who know every section inside and out. But it would also be heavily inclined to rule for the more powerful state (i.e. the US) in most disputes. The relative obscurity and small jurisdiction of the court would make it not worth the effort for American legislators to object to judges too favorable to business, and the power disparity between the US and its partner in any given agreement would make it tough for that nation’s leader to overrule an American appointment. It would be too easy for agreement-specific courts to turn into rubber stamps for American interests, which would hurt poorer states as well as America’s reputation.
The alternative to agreement-specific courts would be a new international court designed to resolve any and all bilateral trade disputes between any two nations. Judges would be appointed by supermajority vote of all court members, ensuring that rich states cannot appoint cronies. The judges wouldn’t have the specific knowledge of judges on specialized courts, but they would have far greater independence and come from far more diverse backgrounds, meaning that the court would not serve as a lapdog for any one nation. Moreover, there is a great deal of overlap between agreements, so the failure to specialize in any one shouldn’t be too crippling. There’s no guarantee an organization like this would have the enforcement power of the WTO, but it would be a definite improvement over the current lack of enforcement when it comes to bilateral trade deals.

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