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Diplomacy and the Settlement of International Trade Disputes

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  • Julia Gray
  • Philip Potter

Abstract

How do countries settle disputes in the shadow of the law? Even in the presence of legalized dispute settlement, countries still rely on diplomatic channels to resolve conflicts. But it can be difficult to assess diplomacy’s impact on dispute resolution because those channels tend to be opaque. We present both an original theory of the impact of diplomacy on dispute resolution and a novel measure of diplomacy. If countries with close or, conversely, distant relationships use legal channels for dispute resolution, diplomacy will have little impact on dispute settlement; resorting to legal recourse among friends or adversaries likely means that the dispute is intractable. However, diplomacy can increase the chances of settlement between countries with moderate levels of affinity. We test this argument using a protocol-based proxy for diplomatic interactions—gifts given at the occasion of meetings between diplomatic counterparts—that would otherwise be difficult to observe. Using the case of the United States and its disputes in the World Trade Organization, we find support for our argument. This suggests that even when countries resort to legalized methods of dispute settlement, bilateral dealmaking still plays an important role.

Suggested Citation

  • Julia Gray & Philip Potter, 2020. "Diplomacy and the Settlement of International Trade Disputes," Journal of Conflict Resolution, Peace Science Society (International), vol. 64(7-8), pages 1358-1389, August.
    • Handle: RePEc:sae:jocore:v:64:y:2020:i:7-8:p:1358-1389
    DOI: 10.1177/0022002719900004
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    3. Corina Simonelli & Iain Osgood, 2024. "Home market power and host market protection of foreign investment," Conflict Management and Peace Science, Peace Science Society (International), vol. 41(5), pages 574-597, September.

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