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Journal of Legal Studies


This paper develops a theory of the rules regarding standing and remedy in international trade and investment agreements. Regarding investment agreements, the paper argues that a credibLe government-to-firm commitment (or signal) that the capital importer will not engage in expropriation or related practices is required and that a private right of action for money damages is the best way to make such a commitment. In trade agreements, by contrast, importing nations have commitments that are best viewed as government to government rather than government to firm. The parties to trade agreements can enhance their mutual political welfare by declining to enforce commitments that benefit politically inefficacious exporters and can most cheaply do so by reserving to themselves the standing to initiate dispute proceedings-a right to act as a political filter. The paper also suggests why governments may prefer to utilize trade sanctions rather than money damages as the penalty for breach of a trade agreement.

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