Dispute Settlement Under the Next Generation of Free Trade Agreements

Abstract

The present generation of free trade agreements (FTAs) suffers from a lack of innovation. This path dependence, which finds its foundation in repetitive language in U.S. agreements and the proliferation of those agreements, has two primary effects. First, it is prompting normative convergence in international trade law as other states adopt principles repeatedly advanced by the United States. Many of the FTAs negotiated in the last twenty years by states around the globe track the U.S. model, at least in certain chapters. Ultimately, and perhaps counterintuitively, the opposite may be true, however. Going forward, convergence in norms may have a negative impact on the development of international trade law in the next generation because it is likely to lead to a disjointed and incoherent regime. This Article demonstrates how and why the next generation of FTAs can and should adopt greater innovations that will benefit the world’s economies. Focusing on the second, detrimental effect of the present path dependence, I maintain that it is highly probable that the disparate use of boilerplate language in FTAs will create fragmentation among interpretations as the United States and other states engage in dispute settlement under those various agreements. For one, boilerplate language could call into question the parties’ meeting of the minds on the language. More important, because the agreements do not provide guidance on how or whether to consider interpretations of their sibling agreements, it is unclear what weight each dispute settlement panel would give to the interpretations of other panels. Because no single court or tribunal decides disputes under FTAs, including FTAs of a single country, the risk of divergent interpretations of shared terms and references drawn from those divergent interpretations is high—or is it? This Article examines how various elements of dispute design may dictate outcomes in the trade law regime.

Keywords: international trade law, free trade agreements, path dependence, treaty interpretation, dispute settlement