Regionalism and Layered Governance: The Choice of Trade Institutions

Article excerpt

Those of us trained in the post-Second World War period, particularly in the United States, grew accustomed to a world in which the key elements of international relations -- security and trade -- were organized in particular ways. In the security sphere, we were accustomed to bipolarity, under which two well-armed superpowers faced each other, backed by incongruous political-economic systems. In the trade sphere, we were accustomed to what we might call exclusionary multilateralism. The trading system operated under a set of multilateral rules, embodied in the General Agreement on Tariffs and Trade (GATT). However, the GATT was basically a Western group, excluding the Soviet Union and most of Eastern Europe.

Dramatic evidence suggests the realignment of both systems during the last decade. The changing face of Eastern Europe and the demise of the Soviet Union ended bipolar rivalry as we had known it. In trade, new forms of preferential agreements, often called regionalism, bilateralism or minilateralism, now play major roles alongside the GATT. In other words, basic international institutions (or what we might call polarity in the security sphere and lateralism in the trade sphere) have changed.

In response, we hear both sighs of relief and warnings of doom. This mixed response should not come as a surprise given the complex roles of economic, political and social institutions. Bipolar rivalry frequently led the superpowers to intervene in conflicts, but that same rivalry made small wars less frequent and bloody by containing lesser powers and ethnic nationalism.(2) With the end of bipolarity have come regional conflicts -- in Central Asia, Eastern Europe and Africa, along with greater uncertainty about who is responsible for dealing with them. With countries and regions no longer in the camp of one superpower or another, the postwar norms for intervention in civil wars also seem inadequate: Somalia, Cambodia, Kurdish Iraq and the former Yugoslavia are examples.(3) The status quo no longer seems to merit aggressive support as a Schiellingesque focal point for avoiding disaster.

In the trade sphere, the GATT process under U.S. hegemonic leadership resulted in a dramatic lowering of tariff barriers during the postwar period, and international trade burgeoned. Many critics complain, however, that the GATT's focus on tariffs merely encouraged countries to adopt less obvious but more pernicious nontariff barriers. The most ardent devotees of postwar trade institutions such as the GATT now seem to value these institutions and their norms as an end rather than a means of achieving or maintaining liberal trade. They consider departures from postwar institutions or from their underlying norms (especially nondiscriminatory multilateralism) illegitimate. At the other extreme, some scholars see the postwar trade institutions, never more than means to an end, as now overextended, inadequate, tired or outdated.(4) They believe that alternatives such as regionalism may complement, supplement or even take the place of the postwar institutions.

Many theories with which economists and political scientists work are ill-suited to analyze whether and how new institutions should be developed.(5) One approach accepts the form of institutions (such as polarity in security or lateralism in trade) as given or exogenous. These are seen as contexts in which the world finds itself, and the scholar's or policy maker's job is to discover each context's implications. Such theories tend to view relationships between polarity or lateralism and other variables (for example, stability, peace or openness) as timeless. They lead their followers to search for time-invariant answers to questions such as: Are bipolar or multipolar systems more stable? How does preferential trade affect efficiency? Does multilateralism limit protectionism? Is trade regionalism incompatible with openness?

The second approach is more normative. …