Few now deny that the world has been largely persuaded to do things the American way. A little-commented-upon but hugely significant aspect of this has been the steady imposition of the explicit contract where trust plays little or no role at all.
In a country where everyone was a stranger, the reliance on the written contract, and its enforcement through the legal system, was natural.
After the Second World War, the Americans sought to apply the same solution to international trade as well. Thus was born the idea of rule-based trade via the General Agreement on Trade and Tariffs (Gatt).
The problems with rules, however, is that they have to be observed. When they are not, someone has to adjudicate over the resulting dispute that can arise over the interpretation of the rules as well as over the breach.
And so the idea of a dispute settlement mechanism in Gatt was conceived and implemented. It worked well enough for a while, but as trade volumes increased along with the number of participants, it became clear that the old system needed to be overhauled. This was done during the Uruguay Round, which gave birth to a new system of dispute settlement in which all were equal and where economic clout alone would not matter.
Has this made any difference or is it business-as-usual as it used to be under the old system? Peter Holmes, Jim Rollo, and Alasdair R. Young in a recent paper* for the World Bank set forth to find out. They ask if
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