Power and the Governance of Global Trade: From the GATT to the WTO

2. Critical Moments and Institutional Resilience

55 The rules of the global trading system that originated in the General Agreement of 1947 evolved over eight rounds of trade negotiations spanning almost half a century until the establishment of the WTO. The regime followed a historical trajectory that is markedly resilient, such that even the shift from the GATT to the WTO is notable more for continuity rather than change in the trade regime (Barton, Goldstein, Josling, and Steinberg 2006). As the first agreement among its participants, the institutional arrangements produced by the General Agreement of 1947 embodied “early outcomes” that generated positive feedback processes in the GATT’s institutional development, forming “deep equilibria” in which key bargaining practices continued to prevail amidst calls for reform (Pierson 2004, 157–160). This chapter focuses on three of the most important “deep equilibria” or sources of institutional resilience that followed after the first General Agreement in 1947: the power-based bargaining protocol privileging principal suppliers and item-by-item bargaining; approval of the U.S. request for a waiver of its GATT obligations in connection with Section 22 of the U.S. Agricultural Adjustment Act (AAA); and the GATT members’ somewhat tacit acceptance of the European Economic Community (EEC) under Article XXIV of the General Agreement. These cases illustrate how “institutional power” derived from the rules of trade governance continue to enhance the “compulsory power” of its most privileged participants, who created them. 2 Critical Moments and Institutional Resilience 56 PART I: RULES The persistence of the principal supplier rule and item-by-item bargaining in trade negotiations and the renewal of tariff schedules demonstrates how the world’s larger trading nations have retained their bargaining position in trade negotiations. The U.S. waiver in connection with Section 22 of the U.S. AAA, approved by the GATT in 1955, not only brought U.S. trade politics to the center of the GATT regime’s attention but also effectively wrote in, unconditionally and permanently, a key piece of U.S. trade legislation into the GATT’s history. It is a key case for understanding how the domestic politics of the leading country came to shape the evolution of the trade regime’s flexibility mechanisms, as a means for the original creators of the regime to provide mechanisms that ensure institutional survival. Flexibility arrangements in the GATT also included provisions for customs unions and free trade areas, which provided the political rationale for accepting, in practical terms, the EEC under Article XXIV. The EEC case was a key precedent for sanctioning such departures from the nondiscrimination principle and proceeded to engender a wide network of preferential trade agreements.1 The exceptions brought about by the U.S. and EEC cases became permanent installations of the global trading order but were largely unanticipated consequences of these flexibility provisions (Pomfret 1988, 67). By building up institutional tolerance to exceptions that effectively went against the nondiscrimination principle, they also contributed to the GATT’s institutional resilience. Power Politics in Time Adding time to the mix of power and institutions highlights the dynamic role of power in the process of institutional development. Studying power in the institutional design stage provides a momentary and static view of its importance, on its own and relative to other explanatory factors. However, that “institutional design creates and reproduces political power,” as Wendt points out (2001, 1035), suggests that institutional evolution is an endogenous process in which compulsory power and institutional power are mutually constitutive. As much as power determines the initial design of institutions, powerful actors are in turn shaped by the institution over time. 1. The United States endorsed, within the GATT, the Schuman Plan and the formation of the European Coal and Steel Community (ECSC) in spite of its discriminatory qualities, as the prospect of Franco-German cooperation in these industries had major security dividends, notably eventual French acceptance of West German rearmament and membership in NATO. The United States also supported European integration through the formation of the EEC in 1957 for the same reasons, tolerating its discriminatory trade practices against the United States and other countries (Patterson 1966, 156–157). CRITICAL MOMENTS AND INSTITUTIONAL RESILIENCE 57 This approach is especially applicable to the GATT as part of the “constitutional order” that the United States created (Ikenberry 2001), committing the victor to institutional arrangements with expectations of future gains even when lesser states grow stronger. This analysis examines the dynamic role of power...