On this episode of the Matrix Podcast, Daniel Lobo, a PhD student in the UC Berkeley Department of Sociology and a 2022-2023 Matrix Communications Scholar, interviewed Ryan Brutger, Associate Professor of Political Science at UC Berkeley.
Professor Brutger obtained his PhD in politics at Princeton University and was previously an assistant professor at the University of Pennsylvania. He is broadly interested in international relations and foreign policy. His research spans international political economy, international law, international security and political psychology, examining the domestic politics of international negotiations and cooperation.
Lobo spoke with Professor Brutger about his new article, Litigation for Sale: Private Firms and WTO Dispute Escalation, which presents a theory of lobbying by firms for trade liberalization, not through political contributions, but instead through contributions to the litigation process at the World Trade Organization. “In this ‘litigation for sale’ model, firms signal information about the strength and value of potential cases, and the government selects cases based on firms’ signals,” Brutger wrote in the paper’s abstract. “Firms play a key role in monitoring and seeking enforcement of international trade law, which increases a state’s ability to pursue the removal of trade barriers and helps explain the high success rate for WTO complainants. The theory’s implications are consistent with interviews with trade experts and are tested against competing theories of direct political lobbying through an analysis of WTO dispute initiation.”
An edited transcript of the interview is included below.
As a scholar of international relations and foreign policy, your research examines how domestic politics shapes and is shaped by international negotiations and cooperation. What do you see as the most exciting developments in this field? What contributions do you see your work making?
I think there’s a lot of exciting work being done in these areas. So I’ll just focus on two that I’m particularly interested in. One is thinking about how the mass public in different countries think about, or choose not to think about, international relations and foreign policy. Some of my work contributes to this realm, but there is lots of great work being done. I think this is really important at this point in time, because we’ve seen that more and more people are questioning the value of globalization of trade, immigration, etc. Understanding how individuals react to news about international relations, trade, or immigration is very important. So some of my work in this area has really focused on the question of how we can build domestic coalitions of support for international cooperation. I’ve looked at this in security bargaining and in international political economy, considering how we get support for trade agreements, and I also extend some of this to look at support for international climate cooperation, which is, I think, one of the most pressing issues facing the world today. I’m hopeful that my work is one small part contributing to a better understanding in this realm, where lots of people are doing great work.
The second area that I think really has made leaps and bounds forward in recent decades is work being done in international political economy that focuses on the role of private firms in shaping foreign policies. And in particular, I think there’s great work being done by the likes of Professor In Song Kim, Professor Ian Osgood, and others who are really looking at how different types of firms can play critical roles in helping shape a wide range of policies, especially when it comes to trade. My article, “Litigation for Sale,” contributes to this area, because I look at the role of private firms in both monitoring and seeking enforcement of international trade law, and looking at how there’s variation across these firms — because not all firms are going to benefit the same. Some might be challenged by increased globalization, while others benefit. Diving into that has been really important for understanding the consequences of globalization, and also the causes of the foreign policies that help facilitate globalization.
Fascinating. I love the focus on the firm as an actor in this story. I’m excited to dig into this theory that you’ve constructed in this paper. So in your forthcoming article on the dispute litigation process at the World Trade Organization (WTO), you advance a theory of how private firms lobby for trade liberalization through contributions to the litigation process. You’ve touched on this a little bit, but expand on why you focus on firms?
So, I think focusing on the firm is both really important, but also just very sensible and logical because, if we think about who’s engaging in trade, by and large, that’s firms, and these are typically private firms. Of course, there are some exceptions in different countries, where there might be state- owned enterprises and such, but in general, private firms are the actors who benefit from engaging in trade. They’re the ones who, if they face a trade barrier, it’s their profits that are going to be harmed, and it might be their workers who suffer. Thinking about the perspective of these firms is critical when assessing how they engage with, and are affected by, international law.
In addition to that, I argue that firms are uniquely situated to play an important role in monitoring and seeking enforcement of international trade laws. This is in part because there’s what I call an “information asymmetry” between the firms and their governments. As I already mentioned, firms are the actors who are most directly affected when they face a trade barrier, so they’re likely to be the first to know when a new trade barrier has arisen that is affecting their flow of goods or potentially limiting their trade and services. This means they’re going to be able to help the government identify these trade barriers. Because there are so many policies that are being put in place around the world that might affect trade that governments don’t have the capacity to monitor all of these different changes. So they rely on firms to bring them this information and help them learn about trade barriers.
That’s part of the reason why I think it’s so important to focus on firms, both because they’re the actors most directly affected, and because they have this informational advantage, and can play an important role in sounding the alarm, especially when they’re facing significant trade barriers.
After reading this paper, I definitely agree that firms are uniquely positioned in this story of trade dispute litigation. You argue that private firms monitor WTO compliance, and motivate states to seek enforcement of treaty obligations, by contributing resources to support litigation, and by signaling information regarding the legal strength and the value of potential cases. As you note in the paper, this results in a few effects, one of which is a greater probability of the complainant country winning the case. What do you see as the main implications of these findings?
These findings have a number of different implications. I can break these down into maybe four implications that are important to focus on. Number one, if we think about the role of firms in being able to identify and help governments pursue specific disputes, this means that the firms actually get to shape what types of trade barriers are challenged at the WTO and where we’re most likely to see enforcement. In the paper, I then develop through formalization, but also just thinking about collective action problems in general, a theory where we can think about which types of firms are most likely to pursue disputes at the WTO. I argue that firms want to challenge barriers that cause a high level of harm to them. That’s very straightforward. But the firms also face a collective action problem [a social dilemma where individuals would be better off cooperating but fail to do so because of incentives to freeride or other conflicting interests between individuals within a group]. I model this and show that firms that are larger are much more likely to be able to overcome that collective action problem. And they’re most likely to not face collective action problems when trade barriers specifically affect a very narrow product line or a single firm or small set of firms.
This means you’re most likely to have firms pressuring the government to bring cases on product-specific disputes, as opposed to trade barriers that affect many different products. This has a really big effect if you think about it. If the government was able to bring cases that affect lots of different products that might provide a larger public good, and it might help increase trade or reduce cost to goods and services for the entire population. But if we think about firms being able to coordinate their activities or overcome collective action problems when they face these narrow product-specific barriers, it means we’re much more likely to have disputes that only affect a very small number of products or a single firm. And so it almost becomes like you’re moving toward private benefits in these disputes. That has a big implication for whose voices are represented at the WTO and the types of trade barriers that are challenged.
Now, we can think about this on another dimension, and that’s which countries are likely to have cases brought, because part of what the theory also outlines is that governments face what I call a “bureaucratic constraint.” You can think of this as a budget constraint; they only have so much money. Agencies responsible for trade tend to focus on negotiating new trade agreements, as opposed to enforcing the old ones. Lots of times, they may not be able to allocate resources to fight for their rights being protected by enforcing trade barriers. But firms can step in and contribute their own resources to bring a dispute forward. This can play an important role in that more disputes can be brought, because it brings more resources to the table. These disputes seek to open up trade and return to the agreements that were reached, say, in the Uruguay Round, or other portions of the GATT [General Agreement on Tariffs and Trade] and WTO negotiations.
Importantly, this strategy is likely to have the largest effect where that bureaucratic constraint or the budget constraint is binding. Lower-income countries might not, from the government side, have the resources to effectively bring a case to the WTO. But if a firm, particularly a large firm in that country, is affected, that firm could choose to contribute its own resources, potentially even hiring private attorneys who have specialized knowledge, and thus allow them to have their dispute brought to the WTO. Now, importantly, only governments get to bring the dispute to the WTO. But this means you can increase the representation of low-income countries through private firms’ involvement. And that, again, has an effect on whose voices are represented at the WTO.
Now, you did mention earlier that the probability of winning a dispute also goes up. And that’s because if we look at this through the formal theory in the paper, it actually shows that there’s essentially a screening mechanism that takes place, where firms are only going to contribute to these disputes if they believe there’s a high probability of it being won. And that’s conditional on some other factors, but essentially it means that only the strongest legal claims are likely to be brought to the WTO. And so that’s why you end up having this very high percentage of complainants winning their disputes at the WTO, which we can think about as being potentially relatively efficient.
By contrast, we have another type of international law, which often comes forward in investment disputes. So we have investor-state dispute settlement, where investors can directly sue other states. But without the screening mechanism in play there, it turns out that many cases that are essentially frivolous, and the complainants lose frequently. But they take up a lot of resources and government time. In contrast, we don’t see that taking place as much at the WTO.
Finally, what I would say is that there’s also a way in which private firms, by hiring specialized attorneys, can really increase the quality of the argumentation. I conducted a number of interviews with elites from around the world and from the WTO Secretariat. And they emphasize that, especially for countries that don’t participate in WTO disputes that often, hiring private attorneys makes a huge difference in improving the quality of their argumentation and the probability that they’re going to win as well. And so substantively, the role of firms can help countries advocate for themselves. I think that effect plays out the most in the low-income countries that typically don’t bring very many disputes to the WTO.
Fascinating, and a clear justification for the focus on firms. I do want to pick up on this last point you made, because this is a unique feature of the paper — that you conducted these in-depth interviews with trade experts from around the world to understand dispute escalation patterns at the WTO. I’m curious, what was this process like for you? Can you discuss the value of inductive research approaches in political science and in the social sciences more broadly?
That’s a good set of questions. Doing these interviews is probably the most fun part of this entire project. I love getting to talk to the people who have worked on these cases from a wide range of perspectives. In total, I ended up interviewing 38 individuals who had engaged in WTO disputes in a wide range of capacities. Some were in-house counsel for private firms that were trying to make sure that their interests were represented. Others were officials working in trade bureaucracies from around the world. I also interviewed private attorneys who worked at major law firms and the folks at the WTO. This really provided a wide range of perspectives, which was just fascinating to learn about in the specific cases that come up.
I realized that, even in very different environments, we saw some of the same recurring patterns. You asked about the value of inductive reasoning in political science and in the social sciences. I think it has a very important place. I was lucky enough, shortly after I graduated college, to end up working in Washington, DC, and working in the realm that allowed me to be privy to lots of these disputes and participating in international disputes working on the legal side of them. I essentially got to observe a number of different cases playing out and seeing these patterns. And that’s actually what inspired the project in the big picture. I was able to combine what I learned from the specific cases, and then engage in the formalizing of a much broader theory. And that led to new implications coming out of the model, like the collective action problems. I was able to triangulate from the bottom up, using the inductive approach, but then also deductively, using the bigger theory to think of additional implications that could be tested and examined both through qualitative interviews and in the quantitative work in the paper. I think what this really did is that it gave me a much better sense of the importance of firms in different situations.
There are occasionally disputes that go to the WTO where firms don’t play a massive role in lobbying, but they’re relatively rare. Some of these came up in the early intellectual property rights cases that the United States brought, in part because they wanted to establish a precedent at the WTO. But by and large, firms do play a really important role. And one example of that, which I learned about when I was interviewing an official who was familiar with a case that arose between Mexico and Costa Rica, was that Costa Rica had put in place new regulations on pesticides that could be used on avocados — not just pesticides, but health and safety standards. Mexico was arguing that these were being applied in a discriminatory manner. At first, it was actually just a consortium of avocado producers who had this concern, and they brought this concern to the Mexican government. The government initially said that this wasn’t a case because every country has different health and safety standards. It didn’t meet the basic level of confidence to even move forward with the case. Then this collective of avocado producers actually brought in assistance and began preparing some of the arguments to the case and changed the government’s mind. So this is where the private actors played this pivotal role. Mexico brought that dispute to the WTO, because the government did realize that the firms were right, there was a case to be made here.The panel ended up ruling in their favor. After hearing these stories, I really understood when government officials changed their mind. In the absence of firms, if we hadn’t theorized their involvement, I would have never done these interviews and we might just have assumed that the government always knew there was a case to be had here. But in truth, if firms weren’t engaging, that dispute would have likely never been brought.
And so I think engaging in these interviews really highlighted the importance of firms. That was true regardless of whether I was interviewing folks who had the firm’s perspective or the government’s perspective. For example, one of the international trade officials I interviewed shared a quote that caught me by surprise. He said:
“There are two main reasons the government can’t manage the facts, in this case of a dispute. The first is that they just don’t have the facts. Typically, the data of what type of violation has taken place is proprietary. You need to have access to proprietary data, so you rely on private businesses to bring the data forward. Second, the costs and resources to put the facts together and process the dispute. Take the European Commission. They can’t afford to put someone on fact-finding for a case full time, they don’t have those positions and can’t assign someone to do it, because there’s no place in the budget for it.”
Getting quotes like that, and realizing that even government officials who work on these cases know their limitations and know their reliance on private firms, really helps us understand what happens at the World Trade Organization. This is particularly important to understand because the WTO is in crisis today, and the dispute settlement mechanism has been essentially brought to a halt due to disagreements over the appellate body appointment process. I think it’s critical that we know how the institution actually works and whose voices are represented in the institution so that we can take those facts into consideration when thinking about also how to reform the system and potentially improve it. This type of research is critical in recognizing how international law has worked, but also building the foundation so that we might think about how it can work better in the future.
Fascinating. And I love that quote that you raised. And it makes me think, how else would you get access to this sort of data on capacity constraints or budgetary constraints without talking directly to the actors involved? I do think it’s an excellent case in point of the value of an inductive approach.
I want to circle back to some of the effects you mentioned earlier, particularly how firms bring additional resources where the state might be constrained. Your theory of informal firm lobbying in WTO dispute litigation challenges conventional wisdom and the literature on compliance with international trade law. You argue that the ability of firms to help countries overcome resource constraints can level the playing field between developed and developing countries on the one hand, and also enhance the influence of large, multinational corporations on the other. So I’m curious, do you see this arrangement as net positive? Are there concerns of private influence in this process?
That’s a great question. I see this process as having mixed effects that can be both concerning and also reassuring. And so I can’t give you a simple yes or no answer on whether this is net positive or not. Because on one hand, it’s critical that we do seek to monitor and enforce international law and help bring countries back into compliance when they’ve deviated. And so having firms assist governments in that process really makes sense, to the extent that firms are the actors most directly affected. And this, I think, also works in a way that does provide benefits. I mentioned the avocado case. Even if we’re worried that it’s a large collective that might have undue influence, they also have lots and lots of workers whose jobs are protected or maintained, in part because their interests are represented in these disputes.
On the other hand, when we recognize that the types of trade barriers that are more likely to be challenged with private firms wielding this influence are relatively narrow and closer to providing private goods (as opposed to public goods), that’s certainly concerning. I think there’s benefits in that more countries can have their cases heard, that the cases that are heard tend to be important and strong cases, so we’re not seeing a lot of what we might call misuse of the dispute settlement mechanism, because they don’t push for cases when they’re low value, or when they think that there’s not a very good chance of winning. Of course, there’s going to be occasional exceptions to each of these.
But then I think we should consider what this does to international law in the long run. If large firms, particularly multinational firms, are best positioned to have their interests represented, we know that that actually shapes the progress of international law. Now technically at the WTO, the law is the law, and the rulings don’t change that. But in practice, we see interpretation playing out. We see whose voices are represented, and that has an effect in the long run, which I think can be concerning. And so we might want to recognize that this is taking place and think about this in the reform process.
There are efforts already underway to address some of the discrepancies or disparities in WTO law. There is an advisory center that helps low-income countries prepare cases, but that still requires that they know that there’s a trade barrier that they want to dispute in the first place. If they lack that information, that still creates a problem. So I think there’s a real tension between wanting to see international law upheld, and also having large corporations wielding much more influence than other companies. That said, large corporations also employ more people, but it doesn’t necessarily connect directly to thinking about the public good. These are certainly firms working for their private interest, trying to have those interests represented. And indeed, that might help their employees and might help sustain jobs. But those benefits are certainly limited, given the nature of the cases that are being brought.
That’s fascinating. It’s a complex arrangement, right? It’s the idealism of having the state be in charge of this process of providing public goods, against the very pragmatic, realistic view that firms are on the front lines of these trade disputes and have the resources to signal the strength of these cases and collect the information required to make compelling arguments.
On this point, I will say, through my interviews, those officials working for the government really do have the public interest at heart. The European Commission officials emphasize this repeatedly. They want to bring cases that provide broad benefits to society. USTR [The Office of the United States Trade Representative], here in the United States, emphasizes similar concerns. But then they run up against, as you say, these very pragmatic concerns: What information do they need to bring cases? What resources do they have to bring cases? And so there’s a tension between the two. And that’s why I think recognizing the role of firms also helps us understand where the actual disputes are playing out and whose interests are represented, versus the ideal approach of what the government might want to bring if they had all the information and all the resources.
This conversation has been fascinating. I’m sure our listeners are very interested in digging into this piece more carefully. Can you let us know where they can read it?
So this has been published, forthcoming in the American Political Science Review. They’re also welcome to visit my website for a preprint version of it as well.
Great. As my last question here for you, can you talk about how this research project fits into your broader research agenda? What else do you have coming down the pike, and what are you most excited about?
So this fits in my broader research agenda of thinking about how domestic factors interact with international law and cooperation — and vice versa. There’s probably too many things on my agenda to talk about all of them. But I will say one project that I’m particularly excited about that relates to some of the points we’ve been talking about today is a project that I’m working on with Professor Amy Pond. Together we’re looking at support for antitrust policies, also known as competition policies, both at the domestic and international levels.
This relates to my other work because we are concerned about the increasing concentration of industries, the fact that fewer and fewer companies are making up a larger portion of international trade, of the production line, etc. That has implications for how they wield that economic power and for, again, whose voices are represented in democracies and in government. So we’re looking at antitrust policy as a tool to potentially curb some of the influence that firms may have, or at least ensuring that we have free and fair competition, so that they can’t use their size to, say, bully out other competitors. That’s leading to a number of papers that Pond and I are working on together. I think it’s a very exciting line of work, and I hope more political scientists will start thinking very seriously about the importance of antitrust and competition policy, especially as large companies, including many tech companies, not only control in many cases the flow of information, but also have so much private data. So I think there’s a lot to be done in this space moving forward.
Excellent. Another timely and important topic to be thinking about. Thank you for your work, and thank you again for joining us today on the Matrix Podcast, Ryan. It’s been a pleasure.
Thanks again for inviting me, Daniel.