This paper focuses on the political economy of legalization, as seen through the dispute settlement provisions of Asia’s preferential trade agreements (PTAs). The analysis addresses two main questions regarding the determinants of legalization in the dispute settlement mechanisms of PTAs, as demonstrated in their levels of obligation and delegation that include formal processes and binding resolutions. The first is whether the degree of legalism in Asia’s PTAs can be explained by a demand-driven account in which domestic economic actors, as major stake-holders in Asia’s globalization, seek greater protection through formal and highly legalized dispute settlement provisions in PTAs. The second question concerns the supply of such protection. More specifically, it is concerned with the role of the World Trade Organization (WTO) as an alternative forum for the settlement of trade disputes and thus, whether membership of PTA-participants in the WTO affects the level of legalism in ‘their’ PTAs. These political economy arguments of demand and supply are juxtaposed with diffusion accounts of dispute settlement design in Asia. In the empirical part of the analysis, we test our theoretical arguments using quantitative methods on a sample of 57 PTAs in the Asia-Pacific region, controlling for alternative explanations for Asia’s traditional ‘aversion’ to legalization. The findings support the demand-side and diffusion explanations of dispute settlement mechanism design. Supply-side as well as instrumental and strategic factors, however, fail to show significant effects on the creation of formal dispute settlement processes or the degree of legal obligation of dispute resolutions.
