Institutional innovation in response to backlash: How members are circumventing the WTO impasse

Abstract

In response to the impasse caused by the US blockade of the World Trade Organization’s dispute settlement body, 52 Member-states have converged on a innovative workaround: the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). This article asks two questions related to this singular, yet overlooked initiative in global governance: first, what determines who joins a novel enforcement mechanism in the midst of a global “backlash” against trade liberalization? Secondly, does the MPIA work? Examining countries’ trade policy in the run-up to the MPIA’s creation suggests that the main motivation for MPIA participation is the possibility to challenge trade partners’ measures; vulnerability to others’ challenges, conversely, does not deter joining. The same analysis can be used to predict subsequent MPIA entrants, in ways that match anecdotal evidence. A corollary finding is that insofar as the US reasons similarly to other countries, its trade profile suggests it does not stand to gain much from more credible enforcement, which may explain its lack of zeal during WTO reform negotiations. Secondly, looking at dyadic trade measures over time, we offer evidence that even at this early stage, the MPIA generates deterrence among its members, and this effect is growing. From an institutional standpoint, the experiment appears to be working: the MPIA is not only an interim solution, but also a prototype for institutional innovation in the face of backlash.