Academic journal article Independent Review

"Foreign Policy and Domestic Policy Are but One System": Mises on International Organizations and the World Trade Organization

Academic journal article Independent Review

"Foreign Policy and Domestic Policy Are but One System": Mises on International Organizations and the World Trade Organization

Article excerpt

The unsuccessful Doha Round and the future of the World Trade Organization (WTO) have been the subject of intense debate recently. The misadventures of the past ten years of trade talks have led many scholars to become more pessimistic about the future of multilateral trade agreements, while the optimists keep busy suggesting alternatives for current negotiations. The one issue both sides agree upon is that the existence of an international organization is a necessary, inevitable step toward international free trade. As a consequence of this general agreement, suggested alternatives revolve around reforming the negotiations arena and rehashing its role.

Once revamped, can the WTO indeed make a lasting contribution to free trade? This article attempts to answer this question by outlining Ludwig von Mises's views on the role and usefulness of international organizations and trade agreements. Unlike our contemporaries, Mises believed that the failure of international organizations was inevitable in the presence of domestic economic intervention. Whereas negotiating governments are attached to the idea of interventionism and thrive on anticapitalistic mentalities, peace and free trade require the unhampered development of free enterprise. In Mises's view, as long as the inherent tension between domestic and foreign policy persists, international trade-planning bodies cannot bring about free trade.

The purpose of this article is therefore twofold. First, it highlights Mises's contributions to the topic of foreign--trade policy, which have so far received little attention. Mises offered noteworthy insights on the shortcomings of international organizations established after World War II, and his remarks foreshadow half a century of international trade negotiations. This stands as a testimony to his acumen and mastery of the topic. Second, following Mises, I argue that the current impasse of WTO negotiations was caused by the pursuit of international agreements that clash with domestic policies in a manner similar to the League of Nations' failure to preserve peace in the early twentieth century.

To this end, the article is structured as follows. The first section briefly outlines the international economic landscape--that is, the international trade system and the free-trade movement, from the beginning of the twentieth century up to the present day. The next section turns to Mises's contributions, as set out in his works and private correspondence. I briefly look at Mises's career as an applied economist to establish his expertise on international policy issues. Further, I show that Mises witnessed in the interwar period the conflict between the agenda of international organizations and the economic nationalism of European countries. Thus, Mises cautioned his readers that peace and prosperity were first and foremost an ideological issue and analyzed in detail how domestic interventionist mentalities would necessarily frustrate international efforts for peace and free trade. The next section then turns to the current problems of the WTO and the Doha Round. I argue that Mises offers a better framework for understanding the predicament of the official international free-trade movement than current alternative explanations. The final section discusses briefly the future of the international trade system by presenting the pros and cons of suggested improvements to the WTO as well as Mises's own alternative solution for the future of international trade.

The International Economic Landscape before and after the Two World Wars

Throughout the nineteenth century and up to World War I, western European economies experienced a "golden age" of classical liberalism and free trade. An international gold standard and a network of trade agreements--whose foundational stone was the Cobden-Chevalier Treaty of 1860 between England and France--provided a sound economic basis for a long period of peace among European countries. …

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