Compliance Bargaining: Strategic Interaction Under Uncertainty and the Escalation of Intra-European Trade Disputes

While the World Trade Organization's dispute settlement mechanism has been widely studied, the European Union's formal infringement proceedings for the resolution of intra-European disputes have largely gone unnoticed despite their much longer history and frequent use. This paper analyzes the interactions between EU member states and enforcement agencies, i.e., the European Commission and Court of Justice. While some scholars have studied the strategic initiation of disputes (Koenig & Maeder 2013, Toshkov 2016; cf. Davis and Shirato 2007, Chaudoin 2014, Johns and Pelc 2016 for related work in the WTO context), the interactions between agencies and member states across the various stages of escalating disputes has received much less attention (Fjelstul & Carrubba 2018). I show that escalation can be understood as bargaining failure. Even when a range of 'deals' exists that both sides prefer to escalation, finding and striking a deal can be difficult and time-consuming. Modelling the interactions as a limited-information, alternating-offers game and testing its empirical implications using a dataset of all intra-EU disputes initiated by 2018, I show how the uncertainty introduced by multilateral decision-making, unstable majorities in national legislatures, as well as the 'age' of European legislation can explain the observed variation. Building on the EU findings, I also discuss how they can explain the breakdown of consultations and escalation of disputes in other international and regional settings.