Law and Social Norms: An Empirical Study of the Control Mechanism in International Trade Dispute Resolution

Abstract:     
This paper explores the impact of domestic social norms on international trade dispute resolution. Applying the idea of a signaling game, I hypothesize that the level of litigiousness of a country exerts significant influence on how its government chooses to resolve disputes with another state, i.e. through settlement or adjudication. To be more specific, everything else equal, a nonlitigious country will more likely choose settlement than a litigious state because of the perceived negative signal attached to litigation. This is especially true when the responding party is also a nonlitigious state. If, however, the accused is a litigioius country, the complaining nonlitigious state is less concerned with the signaling aspect of litigation, thus more likely resorting to adjudication to resolve the dispute. I use both case studies and statistical regression to test the hypothesis. Findings from both types of evidence strongly support it.

Keywords: social norm, law, international law, international dispute resolution, game theory, signal, WTO, trade, empirical study

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