A Social Theory of the WTO: Trading Cultures

A Social Theory of the WTO Trading Cultures

Jane Ford

A Social Theory of the WTO

A Social Theory of the WTO Trading Cultures

Jane Ford Director, Alpha Risk International Departmental Visitor, Research School of Pacific and Asian Studies, Australian National University, Australia

© Jane Ford 2003 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2003 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 0–333–99840–5 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Ford, Jane, 1968– A social theory of the WTO : trading cultures / Jane Ford. p. cm. Includes bibliographical references and index. ISBN 0–333–99840–5 1. World Trade Organization. 2. World Trade Organization— Developing countries. 3. Organizational behavior. 4. Free trade—Social aspects. 5. Free trade–Developing countries. 6. Commercial policy. 7. Foreign trade regulation. 8. International economic relations. I. Title HF1385.F67 2003 382⬘.92—dc21 10 9 8 7 6 5 4 3 2 1 12 11 10 09 08 07 06 05 04 03 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne

2003040522

For Matt

Contents List of Tables

viii

Preface

ix

Acknowledgments

xii

List of Abbreviations

xiii

Introduction Trading Traditions: Straw Arguments in North–South Trade

1

1

Theorizing the Uruguay Round: The Case for Constructivism

14

2

Re-thinking Trade Rules

41

3

US Trade Policy: Mixed Messages

68

4

Trading Roles

94

5

Pro-trade Policies: Creating Collective Identity

116

6

Re-thinking Power in the Trading Regime

133

7

India Adopts a New Trading Identity

161

Conclusion

187

Notes

192

References

198

Index

215

vii

List of Tables 1.1 Regimes and states 2.1 Trade regime structures 4.1 Average ad valorem import charges of selected developing countries 1982 4.2 NTBs on industrial countries’ imports of manufactures 4.3 World development indicators – average tariffs 4.4 Industrial countries’ NTBs on imports from industrial and developing countries

viii

16 45 99 107 108 111

Preface This book began with a question: Is it possible to get what you want in an international public sphere, such as the multilateral trading regime, if you lack material power? And if it is possible, how do you go about it? In international relations theory and dinner party arguments about trade between developed and developing countries, power is generally analogous with ‘clout’. Poor countries are commonly seen to be servants in a client relationship with developed countries with whom they trade. Equally, the institutions of trade are characterized as the instruments of strong traders. The subtext of this argument is usually that international regimes such as the General Agreement on Tariffs and Trade (GATT)1 and its successor, the World Trade Organization (WTO), are imperialist entities. In these regimes, countries without material power seem to have no power to speak and no power to change the institutions. Indeed, I should note at the outset of this book, that this is broadly the position from which I began. This view of developing countries as natural opponents of trade is reinforced by their traditional stance as opponents of trade and particularly, trade with multinational corporations. It is also underpinned by the understanding that insulating high value-added infant industries from trade would help developing countries become stronger. The theory of import substitution, developed in the 1960s, argued that important national industries should be protected from competition with imports until they became strong enough to compete and to reduce developing countries’ reliance on price-sensitive commodities. With this in mind, developing countries traditionally opposed trade liberalization in the multilateral trading regime. By opting to oppose the regime, by protecting their industries and by seeking trade concessions, developing countries established a role as outsiders to the trade regime. With limited trade clout and marginalized from important trade negotiations during the 1960s and 1970s, developing country voices fell on deaf ears in the sphere of multilateral trade. During this period, developed countries had limited incentive to remove protection on products important to many developing countries, such as agricultural and labor-intensive manufactured products.

ix

x

Preface

So it has come to pass that developing countries have been typecast as opponents of multilateral trade, while major developed countries have been characterized as strong supporters of trade. Many protest movements speak of the inequalities of the GATT and its successor, the WTO, for developing countries. Poor countries are naturally seen to be the allies of anti-globalization movements in the West. Equally, developing countries are considered to have limited ability to change the multilateral trading regime to suit their purposes. Consequently, the disputes between developed and developing countries in the Uruguay, Seattle and Doha rounds of multilateral trade have been represented as new battles between traditionally warring tribes. In this context, the WTO is merely more of the same GATT regime established as an interim regime in 1947. Yet in studying the transition from the GATT to the WTO during the Uruguay Round of multilateral negotiations, and particularly the role of developing countries, I have been forced to turn my starting premise on its head. Far from not having a voice in the outcome of the Uruguay Round, a close examination of the negotiating history and the trade policies of developing countries showed that developing countries were instrumental in changing the regime. The trouble was that their role was quite different to that expected of them. Developing countries began to liberalize their trading regimes and they came to the negotiations to bargain. They began to talk tough about the need for developed countries to do the same. They spoke the language of power to power and, for the first time since the GATT was established, some real progress began to be made in highly protected developed country markets that excluded many developing country exports. Equally, developed countries such as the US, which were supposed to be great champions of trade liberalization, had taken a different tack during the Uruguay Round. The US began to protect many of its older industries against competition from developing countries. It began to talk about the need to protect its industries from ‘unfair’ competition from countries with lower wages and environmental standards. It also began to focus its energies on regional trading relationships, forcing other countries to reconsider who their friends were. In this environment, developing countries played a pivotal role in the Uruguay Round of trade negotiations. Issues-based coalitions forced a deadlock in a number of areas, including that between the US and the EU over agricultural protection at the Montreal Mid-Term Review in 1988. A group of developing countries insisted that moves must be made to liberalize agriculture before negotiations could continue

Preface xi

(Ricupero, 1998, p. 21). They were also influential in the shift to a stronger rules-based system in the WTO. The further I dug, it appeared that most commentators on the trading regime had overlooked that the nature of the opposition between developed and developing countries had fundamentally changed. They had overlooked a sea change in the role of developing countries in trade that had occurred during the Uruguay Round of negotiations (1986–94). They also ignored the change in trading culture that emerged from the round. This was embodied in the shift from the GATT 1947 to the regime overseen by the WTO. This surprising observation forced a re-thinking of the theoretical explanations of power in regimes and the process through which regimes changed. Through this process it became apparent that traditional theories really did not deal with the processes of change and, in overlooking this, an important point was lost. The point is that power within regimes is socially constructed and as such, those that lack material power can influence outcomes. This books therefore aims to explain the process through which developing countries’ roles changed during the Uruguay Round, transforming them from their traditional role as the protectionist Other to become part of a multilateral trading Self. It also aims to explain the way in which this transformed the regime’s culture from a rivalrous regime based on nation-building or embedded liberal objectives, to a deeper regime based on disembedded liberalism. The book argues that the WTO regime represented a new culture in which states began to define their trading interests in terms of the group of multilateral traders. Whereas traditional theoretical approaches to the multilateral trading regime adopt materialist analyses, this book adopts a constructivist ontology of the Uruguay Round. Drawing on Alexander Wendt’s Social Theory of International Politics (1999), this book explains that in forming a new collective identity around market-oriented trade norms, developing countries secured greater influence in the trading regime. For example, they used these new norms to hoist developed countries on their own petard, forcing them to liberalize traditionally protected sectors. The insights of social theory suggests that, as states continuously construct their identities and interests through representational practices, all states have the potential to change the meanings that construct power in a social context.

Acknowledgments I am grateful for the assistance of John M. Hobson, Terry O’Callaghan, Darryl Jarvis, Linda Weiss, Winton Higgins, Peter Katzenstein, M. Ramesh, Amitav Acharya, Chris Reus-Smit, Tianbiao Zhu and the team at the RSPAS at the Australian National University, Montek Ahluwalia, Mukesh Ralhan, Anantha Swami, Russel Norman, Clare McLaughlin, Jonathan Murrie, Peter MacLean, Catherine Fitch and an anonymous reviewer. The book could not have been completed without the tireless assistance of Matthew Pearce, Dot Spencer, Elizabeth Thurbon, Susan Park, and my family. Any errors or omissions remain my own.

xii

List of Abbreviations BJP BISD

CTD CTE EEC EFTA EOI GATS GATT (1947) GATT (1994)

GEP GSP G77 HST ILO IMF ISI ISP LTA MEA MFA MFN MITI MMPA MTO NAFTA NGOs NICs

Bharatiya Janata Party. Hindu Nationalist Party GATT Basic Instruments and Selected Documents. Citations refer to the supplement and page numbers. For example, 20S/91 refers to the 20th supplement, page 91. Committee on Trade and Development (GATT) Committee on Trade and Environment European Economic Community European Free Trade Association Export Oriented Industrialization General Agreement on Trade in Services (signed in 1994) General Agreement on Tariffs and Trade (signed in 1947) General Agreement on Tariffs and Trade (signed in 1994) This agreement is just part of a group including the GATS, TRIPS, plurilateral agreements etc. that collectively form the trading multilateral regime overseen by the World Trade Organization. Group on Environmental Measures and International Trade Generalized System of Preferences Group of 77 developing nations Hegemonic Stability Theory International Labor Organization International Monetary Fund Import Substitution Industrialization Import Substitution Policies Long-term arrangement on cotton textiles Multilateral Environmental Agreements Arrangement Regarding International Trade in Textiles (1973) (Multifibre Agreement) Most Favoured Nation Japan’s Ministry of International Trade and Industry Marine Mammal Protection Act Multilateral Trade Organization North American Free Trade Agreement Non-government organizations Newly industrializing countries xiii

xiv List of Abbreviations

NIEO NTB ODA OECD SIA STA T&D TNCs TPRM

TRIMS TRIPS UNCTAD USSR USTR VER WIPO World Bank WST WTO WTO Agreement WWI WWII

New International Economic Order Nontariff barrier Official Development Assistance Organization for Economic Development US Semiconductor Industry Association Short-term arrangement on cotton textiles UNCTAD Trade and Development Report Transnational corporations Trade Policy Review Mechanism. Applied as an interim measure from the Uruguay Round mid-term review in 1988. Established as a Trade Policy Review Body under the General Council of the WTO. Trade-related investment Trade-related intellectual property United Nations Conference on Trade and Development Union of Soviet Socialist Republics. The former Soviet Union. United States Trade Representative Voluntary Export Restraint World Intellectual Property Organization International Bank for Reconstruction and Development World Systems Theory World Trade Organization Agreement Establishing the World Trade Organization World War One (1914–18) World War Two (1939–45)

Introduction Trading Traditions: Straw Arguments in North–South Trade

From a vantage point of post-11 September 2001, as the US is vigorously engaged in seemingly unilateral battles against terror in the Middle East, it is ostensibly difficult to speak of deepening multilateralism. At the same time, though, as the US is increasing its farm subsidies and hiking up tariffs to protect its ailing steel industry, it is increasingly clear that the US no longer fulfills its historical role as the white knight of the multilateral trade regime. Nonetheless the wheels are in motion and negotiations in the 2002–05 Doha Round have begun under the auspices of the WTO. Paradoxically, while anti-globalization social justice movements in the West decry trade liberalization, claiming that it breeds inequality and exploits developing countries, most developing countries are lamenting their inability to trade. As an Oxfam study notes, if developing countries increased their share of world exports by just 5 percent, it would generate US$350 billion – seven times as much as they receive in aid (Oxfam, 2002).1 So, in the Doha Round, developing countries are playing a key role, arguing for greater liberalization from industrialized nations. In coalitions based on common interests on particular issues, traditional opponents of trade negotiations such as India and Brazil are vocally arguing for reduced trade barriers – just as they were in the Uruguay Round of trade negotiations that preceded the Doha Round. Clearly over the past twenty years, we have witnessed a transformation in the structure of trading relations: a role reversal of industrialized and developing nations. Traditional theoretical explanations of the regime rely on a capitalist power broker to explain why the trade regime has become stronger. However, somewhat paradoxically, although America’s material power has increased dramatically over the past twenty years, the nation has become increasingly protectionist. 1

2

A Social Theory of the WTO

Trading tactics: beating them at their own game The trading regime has become increasingly multilateral as less powerful countries have become more important traders and major powers have not dominated trade dispute settlements, as they have done in the past (Schott, 1996b). Certainly, there have been nationalist/protectionist movements in developing countries over this period – in Thailand and Malaysia, particularly, following the Asian currency crisis of 1998–99. However, there has been a clear trend towards liberalization in developing countries as a group since the mid-1980s and the beginning of the Uruguay Round of trade negotiations (1986–93). Waves of liberalization have been mixed with strategic attempts to limit liberalization in key areas as a bargaining asset in trade negotiations. Many developing countries have come to identify themselves as advocates of trade liberalization and to identify their national interests with those of other traders. Yet the transformation has gone unnoticed among many observers. The Doha Ministerial Meeting of 2001 finally produced a commitment for a new WTO round, with development concerns at its center. This was the culmination of a struggle waged for many years and a failed attempt to launch a new round at the Seattle Ministerial Meeting in 1999. During this period, reports of the death of the multilateral trading system were greatly exaggerated. Many accounts of the debates between developing and developed countries characterize them as the struggle between the protectionist South and the liberal North (see e.g. Khor, 2000b). Moreover, trade protection for key industries, although benefiting a few over the many, has been confused with social justice. In popular terms, the debate over trade liberalization has been characterized in Manichean terms of good and evil. Usually this means the evil forces of capitalism and trade liberalization against the virtuous forces of social justice. Trade advocates often overlook the need for measures to counter inequality or environmental damage due to externalities associated with trade. Trade opponents overlook the inequality of excluding the majority of poor countries from world markets and the difficulty of how income will be created without trade. Proponents of these positions were firmly dug-in when developed and developing countries faced off in Seattle in December 1999 over the launch of a new round of trade negotiations. It seemed to many like a rerun of the aborted launch of the Uruguay Round negotiations in the early 1980s. The Third Ministerial Conference of the WTO was widely

Trading Traditions 3

pronounced a failure, just as the Ministerial Conference of 1982 had been when developing countries opposed a new and extended round of talks. Developing countries, led by India and Brazil, had lined up in the early 1980s to oppose proposals advanced by the US and Japan particularly, to extend trade negotiations to new areas, such as trade in services, intellectual property and investment measures (Croome, 1995, p. 20).2 True to their traditional role as opponents of the multilateral trade regime, these developing countries argued against extending the scope of the regime established under the auspices of the GATT (1947). Although developing countries were politically and economically heterogeneous, they formed a sufficiently unified voice to advance a developing country perspective on trade and financial issues in international fora. They argued that such an extension would benefit transnational corporations at the expense of developing countries in general. Their stance had evolved from the 1960s’ movement for a redistributive New International Economic Order (NIEO) that had established a developing country identity in the Group of 77 and in the United Nations Conference on Trade and Development (UNCTAD).

Old battles … NIEO and the developing country identity as the ‘Third World’ had their genesis in development theory, which posited that developing countries were structurally disadvantaged or underdeveloped. Development economists such as Raul Prebisch advocated state-led industrialization and infant industry protection under Import Substitution Industrialization (ISI) policies (UNCTAD, 1983, p. 26). While eleven of the twenty-three original contracting parties to the GATT were developing countries, they quickly became peripheral to negotiations. Developing countries predominantly traded primary products excluded from GATT disciplines. They argued that GATT’s Most Favoured Nation (MFN) treatment, which meant trade concessions could not discriminate against particular countries, would perpetuate their poverty (UNCTAD, 1983, p. 26). In this climate, developing countries aimed to obtain preferential access to industrial country markets and few participated actively in trade negotiations (Martin and Winters, 1996, p. 1). Consequently, the movement for NIEO, and the pressure for special treatment and exemptions in GATT, established developing countries as the protectionist Other to a Self of egoistic and rivalrous multilateral traders.

4

A Social Theory of the WTO

New lines So when developing countries successfully opposed the launch of a new ‘Millennium round’ of trade negotiations in Seattle, the debate was widely reported in similar terms. Nongovernment critics of the international economic order argued that the WTO regime, established in 1995, was undemocratic and represented the interests of multinational corporations and the US (cf. Knight, 1999). Whereas the GATT had become a de facto regime under the auspices of a Secretariat, the WTO was a legal entity. The organization administered an updated GATT (1994), a General Agreement on Trade in Services (GATS), as well as agreements on Trade Related Investment Measures (TRIMS), Trade Related Intellectual Property Rights (TRIPS) and plurilateral agreements. It also managed a built-in agenda for further negotiations and liberalization, monitored states’ trading practices and handled disputes. Critics argued that the WTO aim was to divert resources from developing countries to advanced industrial countries. While environmental, labor and industry groups in developed countries led the charge against the WTO and trade liberalization with violent protests, many commentators failed to recognize the fundamental change that had occurred. Whereas developing countries had previously established an identity as opponents of the multilateral trading regime prior to the Uruguay Round, in Seattle they completely recast their opposition. Developing countries had traditionally called for nonmarket solutions to development problems and a new system of international redistribution (UNCTAD 1, 1964; UNCTAD V, 1979). Yet their opposition was no longer based on opposition to the multilateral trading regime per se or to trade liberalization. Instead, developing countries in the 1990s adopted a new role in trade negotiations, arguing for a stronger multilateral trading regime and substantially greater trade liberalization than many developed countries wanted. As Chandresh Kumari of India argued: ‘Many developing countries [are] today more committed in letter and in spirit to a rule-based market system than the majority of developed countries for whom unilateralism had always been an alternative and a temptation’ (Singh, 1999). Developing countries argued that they had liberalized their own markets dramatically since the 1980s, only to be stonewalled by a ‘mercantilist’ approach to trade in developed countries (Ricupero, 1999, p. 2). As a group, developing countries argued that a new round of negotiations could not progress until developed countries addressed their concerns in areas such as the increasing proliferation of antidumping and

Trading Traditions 5

countervailing duties and subsidies (WT/MIN(99)/ST/17). Developing countries also sought liberalization in senescent industries in industrialized countries. Speaking for the Southern African Development Community, Iddi Simba of Tanzania argued that developed countries should recognize the unilateral liberalization undertaken by many developing countries in the area of services and subsequently commit to far-reaching structural adjustment (Simba, 1999). Developing countries also bitterly opposed the pressure from environmental and labor groups in ‘rich’ countries that had prompted US President Clinton to call for the introduction of environmental and labor standards in the WTO regime (WT/MIN(99)/ST/17). Developing country members of the WTO regime opposed the ‘unholy alliance of protectionists’, including industrial labor unions in rich countries ‘masquerading as the champions of the welfare of workers’, particularly child and female workers, and ‘misguided environmentalists’ seeking trade measures for environmental purposes (Srinivasan, 1999). Indeed, some suggested that these groups staging violent street protests in Seattle were, ‘in a sense, organized and manipulated by various wings and allies of the US administration’ (Raghavan, 1999b). Ministers of developing countries present at Seattle suggested that these groups were merely protectionist movements. They argued that the task of improving environmental and labor standards would be better served by raising incomes through trade rather than through punitive sanctions. So trade ministers of developing countries adopted the language of liberal economics to de-legitimate attempts to incorporate labor and environmental standards in the trading regime (cf. WT/MIN(99)/ST/16). Developing countries also opposed the way private discussions among representatives of twenty countries dominated the negotiating process (Singh, 1999). Ministers argued that the trading regime’s negotiating framework was no longer adequate to deal with its broader membership (Lal Das, 2000, p. 1). They agreed with the then US trade representative, Charlene Barshevsky, in calling for greater transparency in WTO negotiating procedures in the future (Singh, 1999). So although developing countries continued to argue for special and differential treatment as they had prior to the Uruguay Round, they substantially changed the content of these demands (GATT BISD, 29S). For example, despite concerns about ‘food security’ among some developing countries, many joined with developed countries in the Cairns Group of agricultural exporters to call for substantial agricultural liberalization (WT/MIN(99)/ST/53). Whereas developing countries had formerly demanded exemptions and special concessions, they subsequently

6

A Social Theory of the WTO

revised their demands to request technical assistance in building infrastructure to implement their Uruguay Round commitments (WT/MIN (99)/ST/116). They also expressed disappointment over ‘backsliding’ among developed countries in sectors such as textiles that particularly affected developing countries (WT/MIN(99)/ST/9).

New trading identities Thus, in the years between the pre-negotiations for the Uruguay Round and the Seattle Ministerial Meeting, developing countries, as a group, had reversed their role in multilateral trade negotiations. While their interests were more diverse than they had ever been during the Uruguay Round, they still spoke together on important issues such as the elimination of nontariff barriers (NTBs) (UNCTAD, 1994, p. 159). The relatively unified ‘Third World’ identity had eroded, and developing countries formed new issues-based alliances, often with developed countries (OECD, 1992, p. 10). Yet as the Secretary-General of the UNCTAD and former GATT negotiator, Rubens Ricupero noted, developing countries had more in common with each other in trade issues than they did with advanced economies (Ricupero, 1998, p. 15). Developing countries and least developed countries have traditionally been self-defined in the multilateral trading regime.3 These two categories therefore include a spectrum of economies ranging from the comparatively industrialized East Asian countries to Sub-Saharan African countries that are dependent on commodity exports. While there were differences between developing countries over issues such as the elimination of preferences in textiles and agriculture, developing countries often advanced a ‘developing country’ perspective in negotiations. Delegates advanced opinions on behalf of developing countries as a group in specialist negotiating groups and coalitions (Ricupero, 1998, pp. 18–19). Significantly too, developing countries with vastly different economic circumstances adopted liberalization strategies during the round – even those in Sub-Saharan Africa that were isolated from world markets (cf. UNCTAD T&D, 1994, p. 158). This is important as it makes it difficult to explain the policy shift in purely ‘economically rational’ terms as an attempt by countries to maximize utility. Throughout the Uruguay Round, developing countries became active negotiants, heavily influencing the agenda (cf. Ford Foundation Report, 1989). A group of developing countries refused to accept an agreement that would exclude agriculture, forcing the EC and the US back to the drawing board at the round’s Mid-Term Review (Ricupero, 1998, p. 19).

Trading Traditions 7

In vigorously advocating stronger multilateral rules and in unilaterally liberalizing, developing countries eroded their role as the protectionist Other in trade (WT/MIN(99)/ST/5; WT/MIN(99)/ST/17). The irony of Seattle was that the protestors assumed that the US and industrialized countries’ interests were expressed in terms of free trade imperialism over developing countries. Yet it was developing countries that advocated trade liberalization while the US and other major industrialized countries leaned towards protectionist policies. Clearly the irony was not lost on developing countries. Whereas the developing countries’ pressure for exemptions and concessions had resonated with the objectives embodied in the GATT regime established in 1947, such policies were no longer legitimate in the GATT’s successor. The GATT, established under the aegis of US hegemony after WWII, reflected national economic objectives – particularly employment objectives. This regime had therefore permitted compromises such as exemptions for agricultural trade and infant industry protection to meet national social or economic objectives. This compromise represented what John Gerard Ruggie termed the ‘embedded liberal compromise’ (Ruggie, 1996, p. 108). In contradistinction, the WTO regime established in 1995 prioritized market solutions in the same way that the imperial trading regime had done prior to WWII (Henderson, 1998, p. 33). Under the WTO, member states agreed to reduce their interference in trade for national purposes in the interests of increasing aggregate welfare through trade growth. The negotiating position of developing countries strengthened around the need to secure stronger multilateral trade rules and firmer commitments to liberalize from developed countries (WT/MIN(99)/ ST/5). For example, as the Minister of Foreign Relations in Brazil, Luiz Lampreia, told the Seattle Ministerial Meeting: Brazil believes that the major responsibility of the Conference and the core of the mandate it has to issue is to address the most serious distortions that persist in international trade … It is no longer acceptable that certain countries – incidentally some of the richest in the world – be allowed to deny reasonable access to their market for farm products at the same time as they request others to open their own markets even further to products in which they can compete with no risks. It is even more unacceptable, that those same countries should also be allowed to subsidize, with tens of billions of dollars, their own agricultural exports to third markets and unfairly displace exports from others (WT/MIN(99)/ST/5).

8

A Social Theory of the WTO

Developing countries began to identify their interests as being consistent with those of a democratic multilateral trading community (UNCTAD 1992). In this, they identified with a multilateral trading Self.

Defining regime change: a social approach This book aims to explain the process through which developing countries’ roles changed in the multilateral trading regime during the Uruguay Round, transforming them from the protectionist Other to form part of a multilateral trading Self. This book considers the implications of this role change for the culture of the WTO regime. The observation that developing countries and developed countries changed their respective roles during the Uruguay Round has been noted elsewhere.4 However, most analyses of the Uruguay Round are unsatisfying when it comes to providing insight into the way that this change occurred.

Winning, losing The traditional views of multilateral trade have tended to adopt neorealist, neoliberal or neo-Marxist (the Gramscian and world systems theory varieties) theoretical frameworks to explain the international trading regime’s effect on state actions. Rather than emphasizing the processes of change, traditional theoretical analyses of the post-WWII trading regime emphasize its materially defined outcomes. They consider regimes to be merely instruments of state or class power and overlook the constitutive nature of regime norms. While these theories might be useful in explaining states’ behavior in some circumstances, they are at a loss to explain the role of developing countries during the Uruguay Round. They also overlook the power that states have as reflexive or adaptive agents in constructing and sustaining identities through interaction. Significantly, each of these theoretical frameworks employs a materialist understanding of international relations in the sense that materially powerful states determine outcomes. They tend to link the formation of a liberal trading regime with the (material) interests of a dominant power or hegemonic core state. The trading regime is therefore an epiphenomenon. In these schemas, interaction between states in the trading regime might cause them to modify their behavior, but it does not reconstitute their roles or their interests. Even neoliberalism and Gramscian neoMarxism, which accept that trade norms can become a social structure

Trading Traditions 9

and exert some autonomous influence on behavior, underestimate the effects of these norms. Norms and ideas are merely the means through which states achieve interests that are fundamentally material. While neoliberalism and Gramscian neo-Marxism acknowledge some autonomy for ideas in international institutions, these norms are regulatory and merely affect behavior by varying incentives. They do not constitute states as actors. Neither do they constitute states’ interests (Katzenstein, 1996b, p. 23; Wendt, 1999, p. 96).

And how the game is played In contradistinction, this book draws on Alexander Wendt to provide a social theory of regime change in the Uruguay Round. Such an analysis seeks to explain how states’ interests and identities were changed through social interaction, changing the culture of the trading regime from one based on protectionist rivalry to cooperation for trade liberalization. That is to say, the collective ideas that states held about their roles and how to act towards each other changed and they redefined the boundaries between Self and Other.

Chapter map To explain this fundamental change in the trading regime, I offer a structurationist perspective in which social structures and agents are inextricably linked. While agents act within a framework of established social practice and roles, these frameworks do not determine action and are not unchanging. This begins with an understanding that the international trading regime is continuously being constructed by states and it simultaneously constructs states as actors.5 Interaction in the trading regime has not only regulated states’ behavior but it has reconstituted their roles and interests in trade. Chapter 1 uses social theory to explain the trading regime as a distribution of collectively held ideas – a structure that socializes states’ trading behavior and constitutes them as actors (Wendt, 1999, p. 315). This approach suggests social structures or collectively held ideas, such as the trading regime, and constitute power and interests. This is not to say that material forces have no causal powers in international relations. Rather, it recognizes that what is often given to be a material cause relies on ‘ideas’ to produce an effect. The trading culture may be understood as a structure of roles: it defines the relationships of particular actors or their ‘subject positions’

10 A Social Theory of the WTO

in particular social settings (Wendt, 1999, p. 257). Although individuals occupy these roles, coloring these roles with their own attributes, the roles themselves have a timeless aspect and a collectively understood meaning. They cannot be reduced to individuals. These roles are predominantly properties of structure rather than of the domestic characteristics of states although they are influenced by these properties. A culture of international trade, like the culture of the international system of anarchy, involves shared understandings about the relationship between Self and Other (Wendt, 1999, p. 257). In the trading system, for example, roles might be protectionist or reciprocal trader. These postures can be established through a variety of different individual behaviors. Cultural change implies a collective ‘change of mind’ about prevailing roles and relationships. While states can behave in aberrant ways within a culture and not change the culture’s logic, there is a high water mark at which point a generalized change in behavior establishes a new generalized understanding about roles and relationships. So, employing the constructivist maxim that ‘states are what they do in international relations’, this book argues that in adopting pro-trade policies during the Uruguay Round, developing countries eroded their identity as the protectionist Other and formed a new collective identity with developed countries as ‘multilateral trader’ (Finnemore, 1996). This should not be taken to mean that the social processes that form identities or roles teleologically lead to cooperative and collective identities rather than egoistic identities. The social identities of enemies can be equally deeply socialized or internalized through particular interaction (Wendt, 1999, chapter 6). Moreover, while the evolution of norms is largely path dependent, chance and the unintended consequences of actions play an important part. So, although trade ultimately occurs between individuals, the social structures governing trade interactions are formed at the level of states. In multilateral trade negotiations, states are the actors in question, even though individuals represent them in negotiations. Those who represent states in this setting, act within the normative framework that has established that state’s particular trading identity. Negotiators are not free to negotiate as individuals, but carry the weight of that nation’s established thinking on trade matters. For the purposes of analyzing their roles in the trading regime, I treat states as actors. States can be agents or structures at different levels of analysis (Gould, 1998, p. 95). Nonetheless, I recognize that international norms interact with states’ domestic social or normative frameworks and a complete understanding of the socialization process in regimes

Trading Traditions 11

should consider the role of ideas at different levels of analysis. Nonetheless, collective knowledge, that socializes state agents to act in particular ways, means that state action cannot be reduced to action by particular governments (Wendt, 1999, pp. 216–17).6 Neo-Marxists suggest that GATT and WTO documents are merely representations of the bourgeois class and can provide no real insight into state roles that are determined in the final instance by the need to ensure the reproduction of capitalism. Gramscian neo-Marxists argue that the multilateral trading regime merely represents a transnational alliance of national bourgeois classes and a leading capitalist state. Similarly, world systems theorists argue that the regime represents the interests of a core capitalist class. Yet this ‘final instance’ analysis tells us little about the form those interests might take or how they are constructed. Neither does it explain how states are socialized to behave in particular ways.

Mirroring This analysis of the Uruguay Round is designed to explore the representational practices that established a new culture of international trade. To this end, I have used GATT/WTO documents to examine the changing roles and interests of negotiating countries during the Uruguay Round. In these fora, states make representations about their trading practices and those of other states. States create identities and adopt roles through their actions towards each other. Indeed, GATT/WTO procedures, such as dispute settlement, trade policy reviews and negotiations, are forms of interaction through which trade roles are constituted (and become collectively understood). The GATT/WTO documents encapsulate collectively held understandings about trading role relationships. In this sense, they provide an insight into the prevailing culture of trade. Equally, with respect to the changing role of developing countries, I have looked to the UNCTAD, as this was the entity formed by developing countries in 1964 to represent them as a group in international trade and financial dealings. I have used UNCTAD documents to observe changes in the collective understanding about the relationship between Self and Other in trade. Generally, I have relied on developing countries to identify themselves as such and I have used their own representations of their role and interests in GATT documents and UNCTAD. Their representational practices in these fora established a collective understanding about their role as traders in the multilateral trading regime.

12 A Social Theory of the WTO

While some analysts are primarily concerned with the motives of such behavior and dismiss developing countries’ pro-trade policies as coerced or purely instrumental, they overlook the motives agency states have in sustaining identities over time (Raghavan, 1990). Although states might adopt pro-social behavior for instrumental or egoistic reasons, this behavior is likely to affect the trading culture if enough states adopt this behavior and it is sustained over time. As states repeatedly behave favorably towards each other, their egoistic identities erode (Wendt, 1999, p. 342). In this context, the book charts changes in accepted social practices between traders during the transition from the GATT regime to the WTO regime. Chapter 2 identifies three normative tiers or layers of rules in the trading regime. The first tier is a socio-economic schema, which establishes a role for the state in state–society relations, while the second tier consists of procedural rules that shape the generation of policies. The third tier represents the cultural norms that define subject positions or roles in trade negotiations, producing for example, identities such as suppliant or reciprocal trader and a culture of protectionism or multilateralism. This tier also defines the distribution of influence in policy matters, suggesting who has legitimate power to influence policy in this sphere. Chapter 2 argues that whereas the GATT was based on a socioeconomic schema of embedded liberalism in which national economic objectives predominated, the WTO regime represented a disembedded liberal or market-oriented set of ideas. Equally, while the GATT’s procedural rules were based on power politics, those of the WTO were based on institutionalized legal practices. Furthermore, whereas the former regime was characterized by a rivalrous and limited culture of multilateralism, the latter embodied a culture of deep multilateralism or superlateralism, based on a collective identity as ‘multilateral trader’. Chapter 3 notes that in order for a collective identity to be formed, old identities and understandings about Self and Other have to change. It argues that America’s role change during the Uruguay Round contributed to the process through which a new collective identity was formed. America’s hegemonic identity as free trade guardian eroded as it increasingly pursued protectionist policies. Chapter 4 describes the way the developing country identity as protectionists in the trading regime eroded. The decline of the welfare state; globalization of production; rising dependence on trade; and the dissemination of new ideas through epistemic communities created new trading behaviors.7 Consequently, key characteristics of the culture

Trading Traditions 13

changed. This reflected the extent to which states: ●

● ● ●

were similar or homogenous (e.g. whether they had similar socioeconomic organization); were interdependent; recognized a common fate; and were committed to self-restraint.

Through repeated interactions based on new behavior, developed states ‘learned’ developing countries’ new role and developing countries came to see themselves in the role of reciprocal trader. As more and more states changed their representations of each other from protectionist rivals to reciprocal traders, the logic of the system changed to one of liberalization. Even while some developing countries have since readopted protectionist measures, such as Malaysia and Thailand in the wake of the Asian currency crisis, this is characterized as an aberration from the prevailing culture of liberalization, both by the countries themselves and others. Chapter 5 reveals that the implications of this change were important to the distribution of influence in the trading regime. Developing countries used the new socio-economic and procedural norms to influence policy outcomes against the interests of states with greater material power. Chapter 6 explains how particular norms came to prevail over others during the Uruguay Round, forming part of the social fabric of trade relations. This chapter notes that while material factors might influence this process of reproduction, they do not determine it. Chapter 7 shows that while a generalized change in traders’ understanding of their relationships changed the culture of the trade regime, this also implies identity change and behavioral change within states. Given India’s traditional role as a leader of developing country opposition in the trading regime, Chapter 7 explores the way in which the new characteristics of the system influenced and were influenced by India’s changing behavior. Thus this book argues that the transition from the GATT regime to the WTO regime represents a qualitative and structural change in the multilateral trading regime. The new norms embodied in the WTO have redefined the distribution of influence in the trading regime, providing developing countries with power to influence trade policy. This book, which brings ideas and interaction of its analysis of the trade regime to the foreground, paints a textured picture of power in regimes, suggesting new limits and possibilities.

1 Theorizing the Uruguay Round: The Case for Constructivism

Traditional theoretical approaches all offer some insight into the relationship of states in regimes. However, an analysis using social theory tools best explains regime change and, particularly, the transition from the GATT to the WTO regime. This works towards the central aim of this book: to explain the increasingly important role of developing countries in changing the regime’s established social rules or normative framework. Traditionally, change in the international trading regime has been interpreted within three broad theoretical schools: neorealism, neoliberalism and neo-Marxism. These schools differ vastly over the importance and role of regimes in international political economy. Nevertheless, the theories suggest that particular outcomes are likely in international trade negotiations between states that have pre-established interests and identities. They focus predominantly on the material factors that underpin action and they generally understand agents’ identities and interests to exist prior to social interaction. Even those theories, such as Gramscian neo-Marxism and neoliberalism, that find an autonomous role for norms or ideas in international regimes, relegate these to the background. Essentially, traditional theories explain state interests in terms of states’ material circumstances. This is an ‘in the final instance’ argument which says that at base it is tangible things such as the will to survive in the face of economic hardship or military might that governs action. It says little about the processes that form an understanding of selfinterest. In this worldview, states, like people, are born knowing what their self-interest is and how to go about protecting it in any given situation.

14

Theorizing the Uruguay Round 15

Consequently, traditional theoretical approaches do not lend themselves to an explanation of the way states’ interests and their identities changed during the Uruguay Round. In their emphasis on behavior, traditional theories differ from an approach built on social theory that highlights the process through which these identities and interests are formed. Whereas traditional theories are mainly concerned with who gets what out of a regime, a constructivist approach, based on social theory, considers the process through which identities and interests are formed. This often tends to produce a different understanding of outcomes. A social theory approach recognizes that interests do not exist independent of interaction, to be discovered and pursued by rational actors (Katzenstein, 1996a, p. 15). This chapter aims to explore the different ways that mainstream international relations theories explain regime change, and the role of states in this process. With these tools, it seeks to understand the way in which states (as agents or actors) came to redefine their interests and their roles in trade negotiations during the Uruguay Round. It particularly examines the way in which developing countries redefined their identity in the trading regime to become part of a multilateral trading Self and, in so doing, changed the culture of the trading regime and their influence within it. It could be argued that a theoretical comparison oversimplifies competing theoretical debates, creating straw people to tear down. This is not the intention here. Neither is this book designed to be a definitive statement on the utility of competing theories of regimes. Rather, it focuses quite particularly on establishing an appropriate explanatory framework that can account for the way developing countries’ role changed during the Uruguay Round negotiations, changing the norms of the trading regime and its culture. The chapter sets out the theoretical beacons that each ‘school’ might use to explain the transformation of the rules and norms of international trade during the Uruguay Round. Four central questions are pertinent to this comparison: ● ● ● ●

How are regimes formed? Do regimes reflect the power of strong states? How do regimes change? Can comparably weak states affect regimes or effect regime change? These are summarized in Table 1.1.

How do regimes form? Hegemon creates the regime, partly for altruistic reasons Hegemon or small group of like-minded states creates regime Hegemonic class creates regime to benefit bourgeoisie Core capitalist states create regime to help reproduce capitalist system Through cooperative interaction

Theory

Neorealism

Neoliberalism

Gramscian neo-Marxism

World Systems Theory (WST)

Social theory

Table 1.1 Regimes and states

Partially, although less powerful states influence regimes through sustained behavior

Reflects interests of core states

Reflects power of hegemonic state representing a dominant class

Mostly although weaker states can cooperatively shape regimes

Yes, regime is an instrument of a hegemon

Do regimes reflect strong state power?

Through sustained behavioral change which ultimately changes roles

Superficially as states change position in the international system (intrasystemic)

Superficially to reflect change in the mode of production

Through cooperative action

Hegemon declines (intra-systemic change)

How do regimes change? No

Do ideas have an autonomous role in regimes?

Weak states can influence regimes by sustaining different behavior towards other states in the regime

Only by destroying the regime through revolution

Only by destroying the regime through revolution

Yes, regimes are structures of ideas that condition interaction

No

Yes but ultimately regime reflects material base

Can help to strengthen Yes, but limited a regime where there is cooperation

Natural opponents of trade regimes. Destabilizing force as hegemon declines

What is the role of weak states in regime change?

Theorizing the Uruguay Round 17

Hegemonic stability theory: following the leader During the past century, Western political theory acknowledged, at best, a limited role for regimes in influencing relations between states. Generally, the neorealist, neoliberal and neo-Marxist positions have understood regimes as mechanisms for regulating interaction between states. These positions differ over whether the structures of capitalism, the system of states or the rational quest to maximize utility determine states’ behavior in the international realm. In these schemas, regimes are simply superstructures built on material foundations. They are a sideshow to the main event of pursuing self-interest in a particular set of circumstances (Finnemore, 1993, p. 11). This materialist approach limits their ability to explain the processes of regime change, as they overemphasize the role of materially powerful states and underestimate the role of weaker states. It also tends to underestimate the extent of the change from one trading regime to another and the impact of regimes on international relations. For neorealism, which has vied with neoliberalism since the 1970s for dominance in international relations theory, regimes are temporary structures linked to the fortunes of a dominant power. They do not affect the deep structure of the international system: anarchy and its self-help logic. Neorealists such as Kenneth Waltz (1979) and John Mearsheimer (1995) argue that cooperative regimes are aberrations in an international sphere that perpetuates continual conflict and power balancing between self-protective states. Neorealism understands states’ identities and interests as ‘given’, largely determined by the material structure of anarchy (Wendt, 1999, p. 34). The distribution of material capabilities or power among states determines the rules and institutions that regulate interstate relations (Keohane, 1989, p. 54). Neorealism finds that self-regarding states (or units) unintentionally produce an international structure, which subsequently conditions state behavior (Waltz, 1979, p. 91). As states go about looking after themselves in a world without enforceable rules, they unintentionally reproduce a system in which self-preservation is the guiding principle. States’ rational ‘self-help’ actions unintentionally perpetuate the international system. Like the market, the anarchic system of states conditions state interactions and behavior. The anarchic structure and its inherent self-help principle make each state fearful for survival and, therefore, prone to conflict (Grieco, 1993, p. 118). However, in the hegemonic stability theory (HST) variation of neorealism, strong states can form cooperative regimes, but only in the short

18 A Social Theory of the WTO

term. In this perspective, a hegemon or strong power creates trade or security regimes partly for altruistic reasons, but predominantly as a vehicle for pursuing economic and political interests.1 As theorists such as Robert Gilpin and Stephen Krasner have explained, hegemonic powers are able to maintain the regimes they favor either by coercion or by offering incentives to those who follow the rules (Krasner, 1976, pp. 322–3; Gilpin, 1987, p. 76). In forming a trading regime, the hegemonic state enforces the rules of a liberal economy. It aims to prevent cheating, as well as to encourage others to share the costs of maintaining the system (Gilpin, 1987, p. 72). Such a state, endowed with greater economic and military power, is accepted by other states as a natural world leader – through ideological persuasiveness as well as the capacity to wield a big stick (Gilpin, 1987, pp. 76–7). In the HST view of the world, hegemons, such as the US since WWII and Britain before WWI, provided free trade as an international public good (Gilpin, 1987, p. 74). They provided free trade partly in an altruistic desire for international stability and partly because they benefited from it. As hegemons, Britain and the US gained the ability to shape and dominate their international environment, while providing benefits to entice middle and small powers to secure their cooperation (Gilpin, 1987). As the leading economies, these countries particularly tended to gain from free trade regimes. For example, neorealists have argued that the GATT regime particularly benefited the US as the dominant industrial exporter, making free trade (albeit with exemptions) the legitimate policy goal while proscribing protectionism (Hollis and Smith, 1990, p. 37). Nevertheless, HST works within the neorealist understanding that states’ fears for their survival in an anarchic world make them competitive, which means that cooperation and hence regimes, are fragile. While the hegemonic order changes states’ preferences for relative gains in the short term, in the long term states revert to seeking relative gains as the hegemon’s power eventually declines. So, the involuntary need to adapt to the demands of the anarchic system means that regimes are ultimately fragile.

Neoliberal regime formation: cooperation with a catch Like neorealists, neoliberals accept that regimes are difficult to create – although they believe they are less difficult to create than neorealists suggest and certainly less difficult to maintain than neorealists allow. Neoliberals accept that a strong power is often required to provide the necessary leadership to create a regime. They agree that states create

Theorizing the Uruguay Round 19

regimes such as the international trade regime in the pursuit of preformed interests. This reflects the theories’ shared premise that states are autonomous self-regarding actors (Keohane, 1984, p. 29). It also assumes that states are egoistic, rational actors, driven by self-interest that is defined prior to interaction. Neoliberalism, to a lesser extent than neorealism, focuses on the external structural conditions under which governments make foreign policy, while downplaying the impact that internal attributes of the states may have on actors’ choices (Hasenclever et al., 1997, pp. 28–9).2 While neorealists are principally concerned with states’ relative position in the international system, neoliberalism uses a broader understanding of ‘structure’. Neoliberals accept that institutions and norms play an important role in conditioning interactions between states (Keohane, 1989, p. 8). Such an understanding leads neoliberals to conclude that the institutions and regimes that states create can enable them to cooperate in the long term (Keohane and Martin, 1995, p. 49). However, while neoliberalism seeks to introduce a role for ideas in analyzing regimes, it is also fundamentally materialist in nature. Neoliberals suggest that preferences or interests do not depend on ideas or expectations (Wendt, 1999, pp. 114–15). As Peter Katzenstein explains, ideas and beliefs are treated here as intervening variables between assumed interests and behavioral outcomes. In this context, international institutions (and regimes) provide an alternative structural context to the logic of anarchy in which states can define their interests and coordinate conflicting policies (Katzenstein, 1996, pp. 12, 25). However, although neoliberalism emphasizes the function of regimes, it has less to say about the process through which regimes are created and by which regimes are changed. Neither does the rationalist neoliberal approach seek to explain the way interests and identities are formed or the relationship between these processes and regime change. Neoliberal theories of international relations tend to take states as the starting point for analysis. They examine the ways in which states create and interact with the various ‘bits of furniture in the international system’, such as international organizations, legal structures and other states (Finnemore, 1996, p. 5). In making interests and identities exogenous or external to their analysis of regime change, and in overlooking the way norms construct roles and power, neoliberals, like neorealists, tend to underestimate regime change and the role of weaker actors. Neoliberals understand regimes to be formed by states and therefore, states use regimes to maximize their welfare. Robert Keohane notes that regimes might be influenced by international organizations, which

20 A Social Theory of the WTO

evolve partly in response to their leaders’ ideas, and partly in response to their interests as organizations. However, in the absence of international organizations, international regimes ‘are entirely the expressions of the interests of constituent states’ (Keohane, 1989, pp. 5–6, emphasis added). Neoliberals explain that states, usually hegemons or a small group of like-minded states, respond to the problem of uncertainty in the anarchic realm by creating international regimes (Keohane and Martin, 1995, p. 41). In the neoliberal model, states form regimes having calculated the costs and benefits (Stokke, 1997, p. 42). Whereas neorealism finds that hegemons create regimes predominantly through coercion, neoliberalism suggests that states form regimes through voluntary interaction. Indeed, states can only form regimes when they have some common interest that cannot be realized without cooperation (Hasenclever et al., 1997, p. 34). So in the neoliberal model, the multilateral trading regime represents recognition among states that they can maximize their utility through free trade. While cooperation is often hard-fought, neoliberals argue that states recognize the absolute gains to be achieved through cooperative regimes. States are most likely to demand regimes, such as the trading regime, when the advantages of such a regime outweigh the costs of creating it.3 Regimes, such as the GATT or the WTO, embody norms, rules, principles and decision-making procedures that facilitate cooperation (Keohane, 1984, pp. 8, 58). Significantly, these regimes do not change actors’ interests or values but they alter incentives for action (Hasenclever et al., 1997, p. 32). Regimes provide information, reduce transaction costs, make commitments credible, establish focal points for states to coordinate their policies, and they facilitate reciprocity (Keohane and Martin, 1995, p. 42). In a sense, they ‘lengthen the shadow of the future’, providing incentives for states to forgo some short-term gains for long-term gains (Axelrod and Keohane, 1985, p. 232). States create them in the hope that they will affect patterns of state behavior (Keohane and Martin, 1995, pp. 45–6). Gradually, regimes can change the way states interpret anarchy through a process of behavioral learning. Over time states learn cooperative behavior which is appropriate to a social realm rather than a predatory realm (Axelrod and Keohane, 1985, p. 226).4 While regimes embody generalized norms of obligation, they also often incorporate forms of punishment for cheating. This is particularly effective in trade matters. As Judith Goldstein explains: ‘GATT rules were appropriate because they assuaged the fears of potential regime participants that

Theorizing the Uruguay Round 21

they would receive the “Sucker’s Payoff” if they lowered tariff barriers’ (Goldstein, 1993, p. 210).5 Thus, cooperation in the neoliberal sense is mutual adjustment rather than harmony, and it is a long-term rather than a short-term strategy (Keohane, 1984, p. 12, 1991, p. 103).

Neo-Marxist regime formation: centripetal forces Like neorealism and neoliberalism, the neo-Marxist (Gramscian and world systems theory) conceptions of regime formation also understand that states’ interests are materially defined. While Gramscian Marxism incorporates a greater role for ideas in its analysis of regimes, ultimately this approach is also materialist, due to its conception of the relatively autonomous state. Neo-Marxists contend that states can only achieve relative autonomy from class forces and must act in the interests of capital in the final instance. Consequently, Gramscian neo-Marxism separates ideas from material conditions, suggesting that at the end of the day material factors prevail (cf. Hobson, 1997, chapter 7). At first glance, Gramscian neo-Marxism seems to take a similar approach to social theory by proposing a reflexive relationship between material conditions and ideas. That is, Gramscian neo-Marxism recognizes that it is impossible to separate ideas from the material conditions in which they exist or material circumstances from ideas, although they are not reducible to one another (Cox, 1983, p. 168). Yet although this theory suggests that state structures are defined by the social formations that exist at a particular point in time, it finds that state structures are defined in the last instance in terms of their capitalist base (Hobson, 1997, p. 222). New modes of production bring about new structures of social relations, superseding the nation-centered labor–capital relations of the past (Cox, 1992b, p. 177). While this theory allows more agency for state actors than neorealism does, it allows considerably less than neoliberalism. Both forms of neo-Marxism find that strong capitalist states form regimes such as the trading regime in order to channel resources to the core capitalist class and to reproduce the capitalist system. For neoMarxists generally, the motivation for this process is the need to adapt to the demands of global capitalism. So, free trade regimes are underpinned by the demands of a global capitalist economy. Although they might act against the short-term interests of the bourgeois class, states act to perpetuate the capitalist system in the long run (Hobson, 1997, p. 222). The regimes that such states create assist in this function.

22 A Social Theory of the WTO

In contrast to WST and neorealism, Gramscian neo-Marxism finds that institutions and regimes emerge from the social processes rather from the material power base of a particular state (Cox and Sinclair, 1996, pp. 105, 107). Gramscian neo-Marxists use Antonio Gramsci’s (1971) perception of hegemony as consensual power to understand the way international regimes, such as the trading regime, are formed. In this conceptualization, key social institutions in civil society serve to socialize and to integrate working classes into the capitalist system (Hobson, 2000, p. 128). Particular institutions dominate because they are perceived to be legitimate, although they are underpinned by the possibility of force. International relations scholars have extended the Marxist notion of hegemony to a world order, which is usually dominated by a powerful state that represents this hegemonic consensus (Cox, 1983, p. 171). The hegemon constructs a world order to benefit its bourgeois class and, less directly, other national bourgeois classes (Hobson, 2000, p. 130). Cox argues: A world hegemony is thus in its beginnings an outward expansion of the internal (national) hegemony established by a dominant social class. The economic and social institutions, the culture [and] the technology associated with this national hegemony, become patterns for emulation abroad (Cox, 1983, p. 171). Hegemonic states use regimes, such as the GATT, to penetrate the markets of all other countries and to maximize the profits of its bourgeois class at the expense of others, under the guise of universal benefit (Hobson, 2000, p. 130). Although Gramscians consider that these institutions perform an ideological role, by defining policy guidelines and establishing legitimate policy options, ideas are not autonomous of the hegemonic class. Like neoliberals, Gramscian neo-Marxists believe norms in regimes regulate state behavior so that states comply with the demands of the international capitalist system. Therefore, at root, institutions reflect views that favor the dominant social and economic forces and in this these institutions are an extension of the state. Whereas the political superstructure in a hegemonic country grows out of the social relations of production and civil society, the peripheries merely adopt the hegemon’s social and economic practices through the process of passive revolution. Elites in peripheral states are co-opted as foot soldiers of the international capitalist system to the detriment of the people they govern.

Theorizing the Uruguay Round 23

In contradistinction to Gramscian neo-Marxists, world systems theorists observe that core capitalist countries create trade regimes to help them systematically exploit developing countries. This is necessary to reproduce the world capitalist system. Like neorealists, world systems theorists argue that states have limited agential power in international relations. World systems theorists begin with the claim that states necessarily fulfill different functions in a world capitalist system in order to perpetuate that system (Gunder Frank, 1966, pp. 294–6; Wallerstein, 1979). In this context, development and underdevelopment are two sides of the same coin (Amin, 1982, p. 6). This theoretical approach identifies three strata in the world economy: the core, periphery and semi-periphery. The role each stratum can play in creating or changing trading regimes is defined by the international capitalist structure. The periphery provides raw material for processing in the center (Galtung et al., 1971, p. 312). Only core countries can create trading regimes to help reproduce the prevailing capitalist system. The core represents countries with a complex variety of economic activities, together with a national bourgeois hegemony and a national bourgeois state. A hegemonic state, as the most successful capitalist, might form the nucleus of this core (Wallerstein, 1979, pp. 38–9). In a chain of international production crossing national boundaries, the bourgeoisie in core countries receives the greatest share of economic surplus. Core states use structures to codify laws that are favorable to commerce and to prevent strong state structures developing in other areas (Denemark and Thomas, 1988, p. 52). Trading regimes such as GATT help to ensure that industrialized core countries have unlimited access to resources in the peripheral countries (Chilcote and Johnson, 1983, p. 12). Such international economic agencies ensure peripheral economies remain open to world capital flows (Cox, 1992b, p. 174). This perpetuates an unequal system of international capital relations. Multinational corporations siphon off an economic surplus that could otherwise be used to finance internal development. Foreign investment distorts resource allocation and wages in the local economy, as well as the political system by reducing national sovereignty (Moran, 1978, p. 80). For WST, the bourgeois class in peripheral countries is complicit in this process because it is tied to international capital. Only part of a peripheral country is integrated into the international economic system (Caporaso, 1978b, p. 3). Consequently, the state must balance competing demands to sustain the capitalist system in the long term.

24 A Social Theory of the WTO

Regimes and power For mainstream theoretical perspectives, regimes generally reflect the power of strong states. For neorealism, international institutions and regimes reflect the distribution of capabilities in the international system. Power in this sense, is understood as ‘material’, referring to the military and economic power that only leading states can enjoy. International regimes and institutions therefore have no inherent power.6 For neorealists, states are the most important units in international relations and their capabilities influence their position within the international system (Waltz, 1979, p. 82). As hegemonic stability theorists such as Gilpin argue, states require significant economic and military power to ensure that other states will cooperate in a regime. A hegemon provides incentives for other states to remain within the confines of the regime and forces unwilling participants to play by the rules (Gilpin, 1987, p. 76). Equally, for neoliberals, regimes work together with power realities. Regime norms influence state behavior as states begin to value them as a means of achieving their interests. However regimes tend to reflect the interests of the dominant states that create them (Keohane, 1984, p. 256). As for neorealists, the character of regimes is structured by the prevailing distribution of capabilities (Keohane and Martin, 1995, pp. 41, 47). Keohane notes that: The principles underlying the rules and practices of the IMF, GATT, or the IEA reflect the interest and ideologies of the most powerful states in the international system. The cooperation that the institutions themselves foster, however, probably works to mitigate some of the harsher inequities inherent in the principles (Keohane, 1984, p. 256). In recognizing that norms can influence state behavior (partially autonomously) and that regimes can influence the distribution of power, neoliberals differ from neorealists (Young, 1997, p. 15). States construct institutions and regimes to help their governments cooperate to coordinate policies where they will mutually benefit (Keohane, 1989, p. 10). Neoliberal regimes are not quasi central governments, having only partial autonomy from the states that create them. Equally, regimes regulate states’ actions rather than constitute states as particular actors. Regimes change the costs and incentives that states face, causing them to modify their behavior accordingly (Katzenstein, 1996, p. 44; Checkel, 1998, pp. 326–7). While regimes might help states to learn through

Theorizing the Uruguay Round 25

interaction, this is a simple form of learning that affects behavior rather than a complex form of learning, which reconstitutes identities and interests (Ruggie, 1998, p. 4). In the former case, regimes merely provide information that enables actors to realize their interests more effectively (Katzenstein, 1996a, p. 12). So, while they concede that weaker powers use regimes to their advantage, neoliberals underestimate this potential. They overlook the way in which norms can change the meaning of power in certain circumstances. Neoliberals underestimate the sense in which norms are resources that enable agents to act in a particular social formation (Checkel, 1998, pp. 326, 344). In a variation on this theme, neo-Marxism suggests that regimes reflect the power of the capitalist class. For world systems theorists these class interests are predominantly expressed by a hegemonic capitalist state, which can impose trading rules on a weak periphery and semiperiphery (Cox, 1992b, p. 174). Thus, given that the multilateral trading regime was constructed during a period of US hegemony after WWII, it has predominantly reflected American concerns with maintaining monopoly profits at the expense of other regions. Equally for Gramscians, regimes such as the GATT predominantly reflect the interests of the capitalist class in a hegemonic state, supported by the consensus of a transnational alliance of the ruling class (Hobson, 2000, p. 132). As part of the political superstructure, regimes help to make a particular capitalist formation legitimate. For Gramscian neo-Marxists, international organizations and regimes legitimate prevailing norms, co-opt elites from peripheral countries and absorb counter-hegemonic ideas (Cox, 1983, pp. 168, 172). This ideological function enables institutions created by hegemonic states to continue after their material power base has declined. In the Gramscian view, norms have only limited autonomy because, ultimately, they regulate actions to benefit the ruling class. Peripheral states or counterhegemonic forces cannot use norms created by the powerful against the interests of the hegemonic capitalist class.

Regime change While traditional theories generally link regimes to material power, they differ over the way regimes change. The neorealist understanding of state power suggests that ultimately states have very limited agency in regime change. The systemic neorealist account of conflict as a constant

26 A Social Theory of the WTO

in international relations, gives an inherently broad-brush account of change in international regimes. Hegemonic stability theorists argue that regimes decline because states must respond to the demands of the anarchic international system, which ultimately prevents them from cooperating. Change in this context refers to changes in the distribution of power and not to structural change that would alter the logic of anarchy and the need to pursue competitive gains in the long run. In neorealism’s explanation of change in the international sphere, the structure of relationships between states (defined in terms of material power)7 is seen as constraining and indicating state action. While the international structure of anarchy is the unintended product of state interaction, it becomes impervious to attempts to modify it. The survival imperative homogenizes states’ foreign policy prescriptions (Waltz, 1979, pp. 65, 67). Neorealism finds that the enduring logic of anarchy causes recurring patterns of action and outcome in the interstate system (Dessler, 1989, pp. 450–1). So, changes in the trading regime merely reflect intra-systemic change. In this worldview, states are ‘defensive positionalists’. They anticipate aggression and so adopt defensive policies. Consequently, regimes are extremely fragile. States fear military consequences of a differential in gains and they are also concerned about becoming dependent on other states (Grieco, 1993, pp. 118, 353). Grieco claims: States worry that today’s friend may be tomorrow’s enemy in war, and fear that achievements of joint gains that advantage a friend in the present might produce a more dangerous potential foe in the future. As a result, states must give serious attention to the gains of partners. Neoliberals fail to consider the threat of war arising from international anarchy, and this allows them to ignore the matter of relative gains and to assume that states only desire absolute gains (Grieco, 1993, p. 118). This theory discounts the possibility that the system is governed by norms, common interests and rules. It argues that states will not subordinate their national interests in the long term for international order (Burchill and Linklater, 1996, p. 88). In this sense, states are not adaptive agents capable of learning new responses to modify the social structures in which they operate. While a hegemonic state might create regimes such as the liberal trading regime for a limited period, the conditions inherent in the anarchic world system precipitate change. Hegemonic stability theorists argue that ultimately, even strong powers and the regimes they create decline due to the demands of the

Theorizing the Uruguay Round 27

anarchic international realm.8 Gilpin argues: In time, the market produces profound shifts in the location of economic activities and affects the international redistribution of economic and industrial power. The unleashing of market forces transforms the political framework itself, undermines the hegemonic power, and creates a new political environment to which the world must eventually adjust. With the inevitable shift in the international distribution of economic and military power from the core to rising nations in the periphery and elsewhere, the capacity of the hegemon to maintain the system decreases. Capitalism and the market system thus tend to destroy the political foundations on which they must ultimately depend (Gilpin, 1987, pp. 77–8). As this happens, the hegemon becomes predatory, and begins to use its economic power to coerce other countries to conform to its wishes and the regime fragments (Gilpin, 1987, pp. 346, 347). Thus, hegemons eventually become poorly adapted to the international system and so their relative power erodes. Hegemonic states ultimately fail to adapt to the successful practices of rival states (Hobson, 2000, p. 43). This is exacerbated where hegemonic states have limited institutional power or the legitimacy that provides autonomy from their citizenry.9 Neorealists predicted the decline of the multilateral trading regime with the decline of US hegemony prior to the Uruguay Round. As I will explain in Chapter 3, neorealists suggested that the rise of American unilateralism during the 1970s, 1980s and 1990s was a sign that its power was dissipating. For hegemonic stability theorists, America’s growing recourse to unilateralism was a warning that the hegemon was not successfully adapting to the international system and could no longer manage crises in the liberal order (Gilpin, 1987, p. 345). While the liberal international order remained in an ad hoc form, the regime was considered fragile and likely to collapse (Gilpin, 1987, pp. 351–2; Krasner, 1976, 1978). Consequently, hegemonic stability theorists were at a loss to explain the way in which the regime was strengthened during the Uruguay Round while US support for trade liberalization declined. WST also finds change in the trading regime is merely an intrasystemic change. Change in the rules and procedures of world trade and even the roles actors play cannot represent structural change while the capitalist system remains. For world systems theorists, a new trading regime merely reflects the continual cycles of the world capitalist system in which particular countries might change position but the system remains the same.10

28 A Social Theory of the WTO

Consequently, this approach underestimates the nature of the change involved in developing countries’ influence in trade negotiations during the Uruguay Round. For world systems theorists, structural change implies revolutionary change at the global level (Wallerstein, 1979, pp. 35–6). Regime change associated with the transition from one hegemonic order to another does not represent structural or cultural change. In the WST schema, states might change their position in the world economy due to such factors as technological change and climate change. All states cannot develop simultaneously by definition, since the system functions by virtue of having unequal core and peripheral regions (Wallerstein, 1979, p. 61). Ultimately, hegemons decline after the end of a long-wave Kondratief up-phase in the world economy.11 This phase culminates in hegemonic war, which enables a new hegemon to emerge (Hobson, 2000, p. 140). State structures and international regimes are seen to be major obstacles transforming the world system, even when reformist forces control these structures. Hegemonic core states use regimes to perpetuate the world capitalist system and often draw on liberal ideology in this quest. Liberalism provides limited access to political power, and economic surplus at levels that will not threaten the process of accumulation or the state system that sustains it (Wallerstein, 1995, p. 5). Institutions such as the GATT are simply state institutions designed to perpetuate capitalist accumulation. In this model, economic growth in peripheral countries also impedes revolutionary change. In this purview, negotiators representing developing countries in regimes such as the GATT represent a comprador bourgeois class, or elites captured by transnational capital, with interests aligned to the core. In such a world, states that try to de-link from the world economy with a socialist agenda are inevitably unsuccessful (Amin, 1982, pp. 139–41). For Gramscians, the shift from the GATT to the WTO reflects a change in the relations of production and contradictions between the mode of production and the prevailing superstructure (Cox, 1992b, pp. 176–7). In this sense, Gramscian neo-Marxism places more importance on such change, recognizing it as a structural and cultural change, although not as a systemic change. Like WST, Gramscian neo-Marxism ultimately links structural change with transformation from capitalism. Gramscians argue that structures are historically particular and they are transformed when material circumstances have changed or prevailing meanings and purposes have been challenged by new practices. For example, Robert Cox and Stephen Gill describe the change in the trading regime in the context of an internationalization of the state or

Theorizing the Uruguay Round 29

‘transnational consensus formation’ associated with a globalizing economic trend (Cox, 1992a; Gill, 1992a). This globalizing trend has created contradictions within the welfare state superstructure, precipitating the formation of new institutions. Cox argues that [I]t is more and more necessary to think of a stratified global society in which global elites have the impetus in shaping the social order, including the ideology in which it is grounded, and other social groups are in a position of relative powerlessness, either acquiescent or frustrated (Cox, 1992b, p. 178). Gramscians argue that the shift from the GATT regime to the WTO regime merely reflected a change in social relations associated with the transition to an internationalized mode of production. The transition from Fordist production methods meant that the Bretton Woods institutions based on welfare state capitalism were no longer appropriate (Gill, 1992a, p. 271). Consequently, this change reduced the power of labor and increased the power of transnational (particularly financial) capital (Cox, 1992a; Gill, 1992a). Whereas the post-WWII development project, underpinned by the Bretton Woods regime and Fordist industrialism, focused on nationbuilding, the new global order aimed to maximize aggregate world income. Finance was decoupled from production to become an independent power (Cox, 1992a, p. 29). While the international trading regime was born out of the modernist development project of postimperialism after WWII, in the 1980s it came to reflect a shift in the structural power of capital towards mobile financial capital (McMichael, 1996, p. 150). The transformation meant firms traded components with subsidiaries, having sought the most efficient production sites for each part. Global production could play off one territorial jurisdiction against another to maximize reductions in costs and tax and to avoid environmental and labor controls. Consequently, Gramscian neo-Marxists claim governments began to understand that economic growth was hostage to business confidence (Cox, 1992a, pp. 28–30). States became savvy to accommodating global capital and, to this end, they pruned the costs of social programs and maximized labor flexibility. States changed their taxation and regulatory structure to attract foreign investors and they exercised a form of disciplinary neoliberalism or hyperliberalism (Gill, 1992a, pp. 275–6). States formed a new superstructure to accommodate this nascent mode of production and its concomitant social relations and they reversed their focus on internal order. For some, such as Cox, the state

30 A Social Theory of the WTO

consequently became ‘a transmission belt from the global to the national economy where heretofore it had acted as the bulwark defending domestic welfare from external disturbances’ (Cox, 1992a, pp. 29–31). For others, such as Leo Panitch, the state rather internalized and mediated adherence to the untrammeled logic of international capitalist competition within its own domain (Panitch, 1992, pp. 71–2). International organizations and regimes such as the trading regime adjusted to implement this program of internationalizing the state. States, representing the capitalist class, used regimes to disseminate a new international consensus on economic policy and to secure protection for the interests of internationally mobile capital (Gill, 1992a, p. 279). The structures of the new international trading regime insulated national economic institutions from popular scrutiny. They also became a crucible for an economic dialect in which some forms of efficiency, such as micro-efficiency and fiscal discipline, were prioritized over others, such as social efficiency (Gill, 1992a, p. 178). Thus, the neo-Gramscian analysis of the shift from the GATT to the WTO would suggest that change has been minimal, shifting from one capitalist social formation to another. Here developing countries have a limited role in influencing regime outcomes, as these structures merely co-opt elite talent from peripheral countries (Cox, 1981, p. 173). In the new world of ‘globalized production’, not only is the working class fragmented throughout the world, the periphery is also fragmented.12 While the Gramscian analysis of change in the international trading regime attempts to factor in a role for states in regime change, it ultimately finds all states hostage to the demands of international capital (Cox, 1987, p. 132). Paradoxically, although states create transnational regimes, they do so in order to adapt the domestic economy to the demands of the world economy.

Weak state influence in regimes Given that they link regimes with material power, it is not surprising that traditional theoretical approaches generally argue that weak states play a limited role in regime change. The structurally oriented theories of HST and WST suggest that developing countries are unable to influence regimes. In these conceptualizations, regimes are instruments of hegemony. The effect of peripheral countries on the trading regime is largely indirect and extremely limited. World systems theorists find that non-core states have little control over their economic development or over their

Theorizing the Uruguay Round 31

relations with other states. Elites in periphery and semi-periphery states perpetuate this structure of dominance. States, by their function in the international world economy, necessarily support the interests of the core.13 Thus, regimes in a world capitalist system serve the core and can only be replaced following international socialist revolution. Like WST and neorealism, Gramscians see little opportunity for the periphery to improve its position within the prevailing world organization, or much opportunity to influence regimes. Cox argues that elites from developing countries are co-opted into international institutions. Although these developing country elites might seek to change the system from within these institutions, they must work within the structures of passive revolution (Cox, 1983, p. 173). Institutions absorb potentially counter-hegemonic ideas and make these ideas consistent with the hegemonic doctrine. Indeed, Cox claims: There is very little likelihood of a war of movement at the international level through which radicals would seize control of superstructure of international institutions. … Third World radicals do not control international institutions. Even if they did, they could achieve nothing by it. These superstructures are inadequately connected with any popular political base. They are connected with the national hegemonic classes in the core countries (Cox, 1983, p. 173). Developing countries are only able to change regimes by forming a counter-hegemonic bloc and possibly by creating a new set of institutions – this means change from outside the regime. Neorealists such as Stephen Krasner agree that developing countries might alter regimes only from the outside. Moreover, the scope of their action is limited by the structural imperatives of anarchy (Krasner, 1985). Just as hegemonic stability theorists argue that regimes are undermined by structural imperatives, they also argue that the structure of anarchy overwrites attempts by small states to change regimes. Developing countries’ structural weakness predisposes them to seek radical change in market regimes and to gain greater control over international resources.14 Krasner argues that in movements such as the G77 and its push for an NIEO, developing countries have attempted to limit the developed countries’ market power by opposing liberal regimes (Krasner, 1985, p. 313). In order to do this, developing countries have used the liberal regimes established by a benevolent hegemon to provide them with influence they would not otherwise have had in international relations. However, given that regimes must be created by a hegemon and can only be effective

32 A Social Theory of the WTO

while this hegemon supports the regime’s norms, weak powers are limited in their ability to change the regime (Krasner, 1985, pp. 61–2, 301). As US hegemonic power declines, neorealism suggests that developing country pressure is likely to weaken liberal regimes in the long term. The structural conditions that prompt developing countries to oppose market-oriented regimes are ‘enduring characteristics of the international system’ (Krasner, 1985, p. 294). While mutually advantageous deals might be periodically struck between the North and South, tension and conflict prevail. Krasner concludes: A few Third World states may resign themselves to, or accept, marketoriented regimes because they are very large or domestically agile. But most will not. The North–South conflict will be an enduring characteristic of the international system. There are some problems for which there are no solutions (Krasner, 1985, p. 314). In contradistinction to the neo-Marxist and neorealist perspectives, neoliberalism acknowledges a greater role for weak states in influencing change in the trading regime from within. The other theoretical approaches cast developing countries in the role of outsider and critic in the multilateral trading regime. Neoliberalism argues that weaker countries might help to maintain a regime after its hegemonic founder declines. In contrast to the neorealist view, neoliberalism maintains that regimes can become even more important after the decline of their founder, precisely because creating a regime in the first place is so difficult (Hasenclever et al., 1997, p. 39). Regimes might facilitate cooperation on issues that were not thought about at the time of their creation, particularly if such regimes successfully enable states to maximize their gains (Keohane, 1984, pp. 244–7). So neoliberalism tends to explain strengthening multilateralism as an extension and consequence of the GATT regime. In establishing a norm of reciprocal trade concessions, the trading regime can have some effect on state behavior, even in the absence of strong US leadership in trade negotiations. Only where there is mutual benefit, however. Norms define legitimate behavior and they facilitate the involvement of non-state actors in international policy. Coalitions of weaker states might strategically use these norms to influence other participants (Keohane, 1984, p. 256). However, given that regimes are ultimately instruments of stronger states and they are designed to achieve mutual benefit, the range of such strategic interaction is limited. Neoliberals accept that regimes encourage states to modify their behavior but not necessarily their identity or understanding of their

Theorizing the Uruguay Round 33

relationships with other states. In this purview, learning does not change who the actors are and what they want, only their ability to achieve their wants in a given social setting (Wendt, 1999, p. 333). By ignoring the process through which agreement on mutual interest is formed, this theoretical approach struggles to explain how many developing states, with very different values and wants, adopted similar pro-trade policies during the Uruguay Round. Neoliberal regimes change the pay off ratio facing states by providing information and providing a deterrent to cheating, but they do not reconstitute states’ interests or the roles that states play in international relations. This theoretical stance has a tendency to privilege outcomes over process by assuming that actors are always fully aware of their interests and their preferences are formed prior and externally to interstate bargaining (Hasenclever et al., 1997, p. 27). While neoliberalism recognizes that weak states can use regimes for their own purposes, it tends to leave unexplained the process through which they might do it. Neoliberalism does not consider the way that regimes simultaneously shape states’ identities and interests. In ignoring the constitutive effects of interaction in international regimes, neoliberalism falls short in explaining the way in which interaction redefined power in the trading regime during the Uruguay Round.

Constructing a new approach to understanding the Uruguay Round In focusing on the way regimes alter behavior, traditional theories tend to underestimate the change associated with the shift from the GATT to the WTO. By emphasizing the distribution of material power in their analyses of regimes, these theoretical approaches provide limited insight into the way the distribution of influence changed during the Uruguay Round. These theories tend to overestimate the influence of countries with material power and underestimate the influence of those without it. Consequently, they are of limited use in explaining the role reversal of developed and developing countries during the Uruguay Round. The 1989 Ford Foundation Project on developing countries and the global trading system found that negotiating blocs of developing countries tended to focus less on demanding special concessions.15 Developing countries negotiators sought to take concrete steps to influence the outcome of trade negotiations and they proved that they had several sources of leverage in trade negotiations (albeit small). They aimed to use this leverage more actively to achieve their goals (Ford

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Foundation Report, 1989, p. 5). Moreover, in adopting a new role in support of multilateral trade during the Uruguay Round, developing countries changed the culture of the trading regime. This suggests that developing countries had greater agential power to influence the trading regime than traditional theories would allow. These theories provide some insight into the conditioning effects that international structures have on states’ behavior. However, they underspecify the way states with limited material power might change these structures from inside the regime’s structure. Rather than assuming, as traditional theories do, that state interests and identities can be deduced from their objective characteristics and conditions, constructivism problematizes these interests and identities, arguing that they are constructed through social interaction (Finnemore, 1996, pp. 6–7). Whereas traditional theories argue that states form regimes for purely instrumental reasons, a social theoretical take on regimes begins with a structurationist perspective that finds states (as agents) and structure are mutually constituted (Bryant and Jary, 1991, p. 7). Constructivism argues that these norms shape identities and interests (Ruggie, 1998, p. 4; Reus-Smit, 1996, pp. 2–8). The key to this argument is that regimes not only change how power is exercised, they can change the meaning of power in a given social setting (Finnemore, 1996, p. 6; Keir, 1997, pp. 3, 144). Structure (or cultural rules) both enables action and constrains its possibilities; it is the outcome as well as the medium of action. Such an approach stands in contradistinction to Waltz’s positional understanding of structure (Dessler, 1989, p. 452). Social theory simultaneously focuses on agency (recognizing the reflexive role of agents in reproducing structures) and system (recognizing that social structures construct identities and interests). Constructivists agree that the process of interaction in social structures or the reproduction of institutions means that structures are simultaneously being shaped by agents and vice versa (Reus-Smit, 1996, p. 9; Doty, 1996, p. 126). Social theory is concerned with the unintended consequences of individual choices and acknowledges their importance for social construction (Kubalkova et al., 1998, p. 20). Nonetheless, much has been made about whether regime norms are endogenous to people/agents or to structure. As Nicholas Onuf explains, this problem can best be resolved by eschewing a ‘chicken and egg’ argument. He observes: Whether we as constructivists, start with agents or with social arrangements, we come quickly enough to particular institutions

Theorizing the Uruguay Round 35

and thus to rules. If we start with rules, we can move in either direction – toward agents and the choices that rules give them an opportunity to make, or toward the social arrangements that emerge from the choices that agents are making all the time. Whichever way we go, we ought to keep in mind that rules yield rule as a condition that agents (as institutions) can never escape (Onuf, 1998, p. 63). It is still possible to understand that the roles states play internationally are defined by interaction, while acknowledging that much of a state’s identity is also constructed by domestic culture.16 Structures can be agents at different levels of social interaction or analysis (Gould, 1998, p. 95). For example, at one level, while states might be agents in the sphere of international trade negotiations, they might also be considered a structure within which citizens interact at different levels of analysis. States are constituted by internal structures that combine a collective idea of the state with rules that institutionalize and authorize collective action by their members (Biersteker and Weber, 1996, pp. 2, 11). This does not preclude states from acquiring identities and interests through interaction (Wendt, 1999, pp. 243–4).17 For example, ‘sovereignty’ is defined substantially because outsiders recognize a particular state as an autonomous territory with particular social characteristics (Biersteker and Weber, 1996, p. 12). The social identities of states (as opposed to their corporate or intrinsic identities) are generated by interaction with other states (Finnemore, 1996, chapter 1). In this sense, interests and identities are, in large part, endogenous to structure. (Wendt, 1996, pp. 48, 51).18 The role a state plays is partially defined by its interaction with others, and it is influenced by established culturally determined patterns of behavior, as well as by characteristics peculiar to that state. So, in the constructivist schema, the trading regime is not merely a collection of pragmatic principles, designed and perpetuated by materially powerful states: it is a collective understanding. This interpretation recognizes that knowledgeable agents produce social life by referring to their own or to others’ past and anticipated actions in deciding how to act (Onuf, 1998). This produces shared ideas or social structures that appear immutable to individual actors. These ideas constitute legitimate actors in a particular area and condition their behavior (Checkel, 1998, p. 328). Social norms, culturally determined roles and rules, and historically contingent discourse strongly influence and often construct actors’ preferences. Ideas, therefore, construct interests in a way that traditional theories overlook, conditioning agents to see themselves in particular

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ways and to want certain things (Finnemore, 1996, p. 15). With respect to international relations, as Wendt argues: the character of international life is determined by the beliefs and expectations that states have about each other and these are constituted largely by social rather than material structures. This does not mean that material power and interests are unimportant, but rather that their meaning and effects depend on the social structure of the system (Wendt, 1999, p. 20). To explain this further, it is useful to think of the trading regime as a culture of collectively held ideas about legitimate actors and legitimate practices in trade. It represents shared ideas about the meaning of power, interests and behavior with respect to international trade. Just as the culture of states and the international system involve shared understandings about the relationship between Self and Other, so does the trading regime (Biersteker and Weber, 1996, chapter 1). The culture of the trading regime may also be understood as a structure of roles. These roles are structural relationships as they are formed by collectively held ideas. In this way, the trading regime defines the relationships of particular actors in trade negotiations. This has important implications for the distribution of agential power. Rules or norms that construct agents as legitimate actors in a particular culture provide resources for weaker states to influence outcomes. A particular ‘culture of trade’ might be based on different expected practices and relationships. Countries can expect different trading behavior from each other. For example, an imperialist trading regime is based on relationships between states that are constructed as ‘imperial power’ and ‘colony’. This is based on preferential trading norms and mercantilist protection. Similarly, the GATT was a multilateral trading regime in which trade liberalization was limited by the demands of the welfare state. This regime, based on an ‘embedded liberal’ welfare compromise, established expectations of limited trade liberalization in industrial products. Relationships in this regime were based on developing countries acting as ‘protectionists’ or the ‘subaltern’ and developed countries acting as ‘reciprocal traders’. The GATT regime was characterized by limited protectionism and national employment imperatives. As I will argue later, this trading culture was replaced by a new culture of superlateralism based on a collective identity as ‘reciprocal trader’. The roles that particular cultures create represent generalized understandings about the relationships between states. Although they are

Theorizing the Uruguay Round 37

based on repeated interactions between individual states, they represent a collective logic that cannot be reduced to individual actors’ behavior (Katzenstein, 1996a, p. 21). Indeed, these cultures can be produced by a variety of different causes or by a variety of different interactions. Actors conform to these cultures for three reasons: because they are forced to; because it is in their self-interest; and because they perceive the norms to be legitimate (Wendt, 1999, pp. 250–4). That is, they are internalized to different degrees. These roles persist over time and only change when a new system-wide pattern of behavior emerges to change the generalized understanding about Self and Other. In this sense then, actors learn their trading identities or are socialized by the structures of international trade (Finnemore, 1996, p. 13). This learning is quite different from that envisaged by neoliberal institutionalism. Whereas neoliberalism observes states adapting their behavior in response to new incentives provided by regime norms, social theory recognizes that learning happens through cognitive change rather just through adaptation (Kratochwil, 1993, p. 449). Constructivism concentrates on how, by acting in particular ways, states shape expectations about how they will behave in the future. Identities are predominantly formed through cultural selection. This implies complex learning of new roles, as well as imitation of successful practices. They are also formed by natural selection (through the failure of poorly adapted agents to reproduce) in particular circumstances (Wendt, 1999, chapter 7). In the process of complex learning, actors come to see themselves as reflections of how they think others see them. While they bring some domestically derived aspects of identity to their interaction with each other, states learn to relate to other states in particular ways by repeatedly taking a role with respect to others and casting others in roles (Inayatullah and Blaney, 1996). This enables them to take the perspective of the other. Through this process of complex learning, actors mutually adjust to the representations of Self and Other conveyed in each other’s actions. States might change their conceptions of Self and Other for instrumental reasons initially (Wendt, 1999, p. 334). However, this produces shared understandings and expectations about the relationship over time as actors internalize these roles. Agents learn or internalize new identities that become generalized understandings about Self and Other and the way to behave in a particular sphere (Wendt, 1992, p. 417). Over time, this kind of interaction can produce a shared expectation of imperialism, selective protectionism or trade liberalization. Particular forms of cooperative interaction between states can lead to an evolution of

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community or collective identity (Wendt, 1996, p. 57). Where this happens, actors no longer define their interests purely in egoistic terms but acknowledge that their own interests are linked to those of others. In recognizing the trading regime as a structure of ideas and noting that this structure and states are continuously mutually constructed, social theory provides a new way of looking at change in the trading regime. While cultures tend to be stable, actors can change them over time by changing their behavior (in aggregate) (Giddens, 1976, pp. 129, 134). The concept of structural change refers to cultural change that changes the generalized understanding of relationships between actors. Such a change is established by a generalized change in behavior that causes states to internalize new roles. It establishes new preferences among actors by changing their identities as well changing their behavior. This implies changes in many layers of social interaction. Structural change occurs when there is ‘collective change of mind’ about the relationship between Self and Other. It involves the erosion of old identities and the formation of new ones and suggests change in states at the domestic level or their ‘unit-level characteristics’, as well as in their interactions. States’ behavioral traits vary due to domestic changes in the structure of state–society relations and from the strategic choices of foreign policymakers (Wendt, 1999, p. 319). These changes are distributed or disseminated across the population of states by the processes of natural selection (when poorly adapted actors fail to reproduce), complex social learning and through imitation of successful behaviors (Wendt, chapter 7). Nonetheless, cultural change cannot be reduced to the actions of individuals or individual states. A cultural change can be produced in various ways and in response to many different stimuli. Wendt identifies four systemic conditions that cause states to change their behavior towards each other (to adopt cooperative or antisocial behaviors) and subsequently produce new generalized identities (Wendt, 1999, chapter 7). These can be thought of as conditions of the social environment that are produced in multiple ways. The main systemic characteristics or causal mechanisms that influence states’ relationships are levels of interdependence, common fate, homogeneity and self-restraint. Significantly, these conditions are not only objective or material conditions but also subjectively understood. It is the subjective understanding of these conditions and what they mean that constitutes a collective identity in which actors experience each other’s gains and losses as their own (Wendt, 1999, p. 344).

Theorizing the Uruguay Round 39

Logically, states’ abilities to identify their own interests with each other are influenced by the extent to which the states in question are homogenous or similar and whether they recognize this similarity. For example, states that share a similar domestic socio-economic organization (such as a welfare state focus) and policy objectives, might be better able to identify with each other in trade matters than those that have completely different socio-economic objectives. States that recognize that they are interdependent in the sense that the outcome of their interaction depends on the choices of the others might identify their own interests in terms of others. A collective identity is also formed when states recognize that they share a common fate. Epistemic communities that disseminate this knowledge or help produce a discourse of common fate provide a collective way of understanding a particular circumstance. Furthermore, a generalized practice and recognition of self-restraint is also needed if states are to form a collective identity. A change in these environmental conditions can prompt states to adopt new behaviors that erode their old generalized identities, causing a cultural or structural change. For example, objectively greater homogeneity, interdependence, common fate and self-restraint, and collective recognition of these conditions, prompts states to engage in cooperative behaviors. This creates a collective identity as states redefine the boundaries between Self and Other (Wendt, 1999, p. 342). The structurationist insight into regimes also offers a new way of understanding how regimes such as the trading regime work. Although material power influences the distribution of ideas, it does not determine collective understandings. As Ann Florini argues, norms held by powerful actors ‘have many more opportunities to reproduce through the greater number of opportunities afforded to powerful states to persuade others of the rightness of their views’ (Florini, 1996, p. 375). Neither does material power determine outcomes in the way that traditional theories suggest. Norms are resources that might enable actors with limited material power to influence outcomes (Checkel, 1998, p. 326). Social theory emphasizes the discursive, deliberative, and persuasive aspects of communication and argument in forming and changing regimes. Policy not only relies on physical capability, but it also requires a framework of meaning in which the intentional and the unintended consequences of action can become a framework for interaction (Dessler, 1989, p. 454). Hence, social theory helps to provide some insight into how states with limited material power can influence regime change and cultural transformation.

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Conclusions So while traditional theories that emphasize the importance of material power in regimes find a limited role for weak states in regime change, social theory provides a more textured way of understanding power in regimes. In understanding regimes to be merely superstructures on a material base, traditional theories have considerable difficulty in explaining how developing countries adopted a new role during the Uruguay Round. In focusing on the regulatory aspect of regime norms they ignore the processes through which the trading regime works, specifically, the way in which the regime constructs states’ interests and identities. Not only do these theories underestimate the change associated with the shift from the GATT to the WTO, they underestimate the way in which new norms changed the distribution of influence in trade matters. In contradistinction, social theory finds that the trading regime is a structure of collectively held ideas. Therefore, the shift from the GATT to the WTO can be explained in terms of a cultural change in which states redefined their respective roles. A structurationist approach that recognizes that structures and states continuously reproduce each other also provides a more textured view of the role of weak states in regimes. As the following chapter will explain, the way in which states adopted and used new trading norms during the Uruguay Round changed the culture of the trading regime.

2 Re-thinking Trade Rules

Some trade analysts have described the transition from the GATT to the WTO trading regime as ‘the most important event in recent world history’. These analysts claim that the WTO is the central international economic institution (Bierman et al., 1996). Yet others have claimed that the WTO modestly extends GATT, rather than embodying substantive rules over governmental policies ( Jackson, 1998, p. 1). Traditional theoretical accounts tend to advance the latter view. However, an examination of the normative frameworks embodied in each of the regimes suggests that the difference between the GATT and the WTO is substantial. This chapter takes up the social theory tools that the previous chapter provided to demonstrate that the changes to the trading regime’s social rules represented an important shift. This involved changes in state identities and social practices in trade. The transformation represented a qualitative change in the sense that it caused states to reassess the boundaries between Self and Other, producing a new culture or structure of trading relations. The rules and philosophies underpinning the WTO suggest that the Uruguay Round was a point of inflection in the post-WWII international trading regime. Whereas the post-WWII GATT trading regime had enabled developed countries to balance their multilateral trade objectives with embedded liberal or welfare state objectives, the new regime restrained market intervention for social purposes. The Uruguay Round established a stronger and more formal code of trade rules. It applied these principles to new areas that were important in an evolving global economy. It also established the WTO as a legal entity to oversee GATT (1994), the GATS, TRIPS, TRIMS and plurilateral agreements, as well as to manage trade negotiations and disputes. This was a significant multilateral advance on the de facto institution provided by the GATT 41

42 A Social Theory of the WTO

secretariat that administered GATT. Indeed, Canadian Uruguay Round negotiator John Weekes claimed: [T]he creation of the WTO was more than just another step in the evolution of the system. It represents a major mutation which has irrevocably changed intergovernmental cooperation in the trade field, most importantly through regular meetings of ministers in the Ministerial Council and a predictable and definitive dispute settlement system, unprecedented in international law (Weekes in Jackson, 1998, p. xiv). The new international trading regime substantially changed the way states interacted in international trade matters. States established new roles and relationships during the Uruguay Round, beginning to link their own interests with those of traders as a group. Although it required self-restraint in trade issues, establishing a strong international trading regime was considered to be the best option. Consequently, they formed a collective identity as ‘reciprocal trader’, despite the particular difficulties associated with multilateral liberalization faced by individual states (UNCTAD VIII, 1992, pp. 53–4). The regime can be explained as a structure of collectively held ideas that make sense of material factors and relationships in trade issues. In this context, the transition from the GATT to the WTO regime represented a structural or cultural change. Not only did the new regime embody new procedural rules, it represented a new socio-economic framework for trade. The regime’s norms shifted from Keynesian to neoclassical economics, Import Substitution Industrialization (ISI) to Export Oriented Industrialization (EOI) and redistribution to reciprocity. Furthermore, the new WTO regime became substantially stronger than its predecessor, despite the accepted predictions that greater multilateralism causes regime fragility or weakness. The collective mind shift embodied in the WTO was both a product and a progenitor of the new trading regime. Such a shift involves identity change at the domestic level within states, as well through interaction as states learned new roles. In changing the generalized understanding about the boundaries between Self and Other, the Uruguay Round produced a deeper trading regime, not just a broader regime with more actors, as neoliberals suggest. Rather, as developing countries adopted cooperative trade policies in the multilateral trading regime during the Uruguay Round, they changed the regime’s culture from ‘limited multilateralism’ to ‘deep multilateralism’ or ‘superlateralism’ (Sassoon, 1997, p. 8).

Re-thinking Trade Rules 43

At the same time, this represented a change from a rivalrous culture of anarchy to a cooperative one.1 Rather than merely reflecting coercion or self-interest as traditional theories suggest, the trading regime reflected recognition among participating states that their national interests equated with the international or collective interest (Wendt, 1999, p. 304).

Trading ideas The international trading regime is best described as sets of (social) rules and convergent expectations (ideas) derived from the customary practices of international trade (Onuf, 1989, pp. 144–5). The regime represents persisting patterns of thought and actions that define the framework within which people and states act (Cox in Krause and Knight, 1995, p. 8). Like other regimes, the trading regime is premised on rules of engagement at varying levels of social organization. While rules have developed into formal institutionalized structures in the multilateral trading regime, they evolved from the dynamic social practices guiding trade at an individual level. States, like individuals, actively participate in constructing their own social reality, exercising judgment about the importance of material and cognitive factors (Onuf, 1989, p. 114). The trading regime represents a structure of relationships that establishes identities such as ‘imperialist’, ‘subaltern’, ‘suppliant’, ‘autark’, ‘protectionist’ or ‘liberal trader’. It establishes rules or norms that construct actors as ‘insiders’/Self or ‘outsiders’/Other to these roles. Recalling Onuf (1989), states, like people, learn what rules require of them and they learn how to use rules. While they have become increasingly formal, international rules reflect a limited law. Their cogency is derived from other social laws and practices, that is, they are defined intersubjectively (Wendt, 1996). The trading regime embodies a particular cognitive schema. For example, the trading regime of the nineteenth century reflected the prevailing acceptance of imperialism, bilateral trade liberalization and mercantilism. While Britain engaged in trade liberalization, the trading system could by no means be described as a multilateral trading system as it came to be understood in the twentieth century (Ruggie, 1992, p. 581).

Dissecting the trading regime: three tiers Given this analytical framework, we can trace change in the international trading regime in terms of a changing collective mind-set and new social roles, rather than change restricted to behavioral rules.

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The shift from imperialism to decolonization during the twentieth century is an analogous transition. While policy changes might have begun as a simple instrumental action, they were increasingly internalized. To examine the change in the multilateral trading regime’s collective mindset, it is useful to dissect the regime into three normative tiers or layers of rules. Tier one is a socio-economic schema that structures the socioeconomic practices informing economic policy. This normative framework establishes a role for the state in market–society relations and determines the balance between authority and market in state–society relations (Ruggie, 1982, p. 386). In a sense, this framework also defines the expected balance between transnational economics and domestic political objectives. Tier two refers to the procedural rules that shape the generation of policies. For example, policies might be generated through politicking based on instruction rules or alternatively, through institutionalized legal practices. Tier three describes the regime’s cultural norms; the structures of feeling that create boundaries between what is included and excluded from a collectivity (Wark, 1997, pp. 18–22). This norm might be imperialism, bilateralism, multilateralism or ‘superlateralism’.2 Like other social structures, trade structures are multilayered and contested. The culture of the international trading regime is analogous to the culture of anarchy in the international system. In a sense, the system of traders is a microcosm of the system of states. A trading regime, like anarchy, has no intrinsic logic. In this issue area, states form shared ideas about their own roles and those of others. These expectations might form around protectionist trading behavior, imperialist trade, autarky or free trade, for example. The contemporary trading regime is based on a notion of trade between states although trade predominantly occurs between individuals and companies. The WTO regime is also premised on ‘deep multilateralism’ or superlateralism. However, as Table 2.1 suggests, it need not be. An international trading regime might be organized around trade between individuals with no regulatory barriers (given appropriate technology and will). It could also be based on a preference system, as were former imperialist regimes. Imperialism was based on mercantilism and military conflict over colonies and its procedural norms favored great powers. In contrast, the GATT regime involved rivalrous and limited trade liberalization, and the ‘embedded liberal’ social welfare compromise (Ruggie, 1982, 1998). Moreover its procedural norms and its culture involved a structure of roles that distributed influence to materially powerful industrialized

Re-thinking Trade Rules 45 Table 2.1 Trade regime structures Imperialism

GATT

WTO

Tier 1: Socioeconomic schema

Mercantilism

Embedded liberalism Welfare state compromise

Disembedded liberalism Neoclassical economics/ minimalist state

Tier 2: Procedural norms

Zero-sum power politicking between imperial powers Imperial wars

Diplomacy/ negotiation Limited trade wars

Legalism/rules Adjudicative system

Tier 3: Culture/roles

Imperial: power/subaltern Conflictual culture

Limited multilateralism Limited trader/mendicant Egoistic culture

Superlateralism Reciprocal multilateral traders Cooperative culture

Main means of influence

Military power

Economic power

Legal obligation Collective identity

Distribution of influence

Distribution of material power Favored great powers

Distribution of material power Favored great powers

Deep distribution of influence Developing countries gain influence

Trade outcome

Colonial preferences Protectionism

Limited free trade in industrial products

Reciprocity and cooperation based on liberalization

states. However, the WTO regime, based on neoclassical economics and legalism, does not favor great powers to the same extent. The culture of superlateralism changed the relationships between states, redistributing influence. Evidently, distributions of ideas structure the meaning of trade relations. Such cultures tend to be largely internalized although they might be associated with tangible, legalistic rules (Wendt, 1999, p. 249).3

From GATT to WTO: redefining national interests In each of these normative tiers, the WTO regime represents a substantive change from GATT. The latter incorporated an entirely different socioeconomic schema and significantly different procedural rules. The GATT

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represented ‘embedded liberalism’ in which states limited their commitments to trade liberalization where these objectives conflicted with domestic socio-economic objectives. Consequently, it embodied a weaker form of discipline than the WTO. The original GATT regime developed a rule-set formalized by institutions in contrast to the bilateral trading systems of the recent past. Although it was ostensibly based on institutionalized rules, the GATT was procedurally ordered by predominantly American trading might, politicking, negotiation and limited trade wars. Moreover, active participation was effectively limited to a small group of industrialized countries. To understand the normative changes that occurred during the Uruguay Round, we must first explain the normative frameworks that constituted its predecessor.

Situating the embedded liberal regime: tier one The socio-economic norms embodied in the GATT regime can be better understood by a comparison with those of the nineteenth-century Pax Britannica, outlined in Table 1.1 (Ruggie, 1992). Whereas the GATT was a limited multilateral treaty, the British trading regime operated unilaterally and bilaterally. The latter also embodied classical liberalism, which defined a minimal role for the state in the market and social affairs, thanks largely to a mid-nineteenth-century reaction against high taxation levels. In this era, the state’s role became to institute and safeguard the self-regulating market. The economy was seen to be ‘disembedded’ or separate from the society in which it was contained (Ruggie, 1998, p. 66). Britain focused on maintaining the gold standard and achieving external balance of payments even at the cost of great unemployment and income disparity. Such a strategy was possible given Britain’s imperial power and limited franchise, which restricted popular opposition to high unemployment. The nineteenth-century imperial system reflected the prevailing belief that the Western ‘civilized nations’ were superior to the oriental ‘uncivilized’ peoples. The international legal system, which was a club of great powers supervising ‘uncivilised’ colonies, facilitated the expression of this idea (Puchala and Hopkins, 1983). In contrast, GATT reflected a mind-shift associated with decolonization and new socio-economic ideas. Imperial trade gradually became unacceptable as the competing norms or social rules of national selfdetermination and democracy became legitimate (Goertz, 1994, p. 253). Decolonization, derived from the European struggle to extend the franchise, helped to de-legitimize the iron grip developed countries had on international institutions and it facilitated (limited) multilateralism

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(Emerson, 1960, p. 16). Social rules governing relations between states and their respective societies dramatically changed, epitomized by the rise of Keynesian economic management. This influenced new ideas about acceptable trade practices. As more and more people became eligible to vote, national governments could no longer afford to focus on balancing the international system of payments at the expense of employment. Thus, the disembedded liberal economic regime failed in the interwar period. The formerly acceptable practice of maintaining the gold standard despite high unemployment contradicted the state’s new role as mediator between market and society (Ruggie, 1982, p. 392). An embedded liberal compromise, which privileged national social welfare over trade concerns, replaced this regime. This recognized a strong interventionist role for states in markets and society (Ruggie, 1982, p. 393). New international institutions had to juggle domestic social welfare concerns with the problems of increasing economic interdependence and the need for trade and currency stability. The regime emphasized collaboration to achieve domestic economic growth and social security. To this end, the regime permitted trade policy inconsistencies, recognizing that policy is made subject to it being acceptable to domestic constituents (Lipson, 1982, p. 427). This reflected the shared legitimacy of a set of social objectives that industrial nations gradually embraced in the postwar world (Ruggie, 1982, pp. 3, 398). The GATT regime embodied new liberal notions of positive state intervention to secure peace and social harmony. As Ruggie explains: [S]ocieties were asked to accept the transitional dislocation attending international liberalization. In turn, liberalization would be constrained by the domestic economic and social policy roles of governments, and its serious adjustment costs socialized … The embedded liberalism compromise was not intended as a one-time fix but as a dynamic equilibrium, a steadily evolving set of practices that would, however, continue to reflect a rough balance of obligations to external and internal stability (Ruggie, 1996, p. 108). Attempts to formalize trade liberalization were facilitated and limited by the surrounding material circumstances and by ideas that prevailed. On one hand, historically legitimated practices such great power leadership were reflected in GATT rules. The regime’s socio-economic norms, which privileged national welfare objectives, spliced intellectually with the international rise of Keynesian economic theory that helped to establish the national economy as an object of government. On the other hand, lingering norms, such as imperial preferences, which made it difficult to eliminate preferential trading agreements,

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limited the regime’s scope. Although America’s position as the strongest economy provided it with the potential to disseminate ideas in the regime, the norms of trade liberalization and international leadership were not an integral part of America’s domestic social rules. Consequently, America’s formal commitment to multilateral trade was not particularly strong. So GATT became a rather weak institution, with limited scope for trade rules to intrude in national issues. The former Allied states formed a reciprocal agreement to reduce tariffs and they drafted schedules of tariff obligations to be included in the trade treaty. While planning an organization to oversee the treaty, the group applied GATT provisionally as a treaty obligation and GATT technically became an interim UN body until its transformation in the 1990s. While drafting sessions in New York (1946), Geneva (1947) and Havana (1948) produced plans for an International Trade Organization (ITO), the US Congress refused to ratify them (Sassoon, 1997, p. 8).4 Nonetheless, in contrast to the Pax Britannica of the nineteenth century, GATT was ostensibly nondiscriminatory. It was premised on an MFN principle, which stipulated that a country’s best tariff treatment of an import must be applied to other countries unconditionally. A national treatment rule stipulated that Contracting Parties must treat and tax imports no less favorably than domestic goods (Hoekman and Kosteki, 1995, p. 26). Trade policies were to be nondiscriminatory unless Contracting Parties were members of a regional trading agreement, offered concessions to developing countries or faced imports from nonmembers (Hoekman and Kostecki, 1995, p. 89). The GATT also aimed to prohibit quantitative restrictions as these were considered most trade distorting. However, its wobbly legal structure made enforcing this difficult from the outset. The practice of ‘grandfathering’ existing conflictual laws allowed quantitative restrictions to persist (Hoekman and Kostecki, 1995, p. 99). States continued to define their interests individualistically in GATT and they expected to have intermittent trade conflicts. The embedded liberal compromise helped to produce this culture because in an age of few global connections states had limited expectations of trade. States pursued economic growth by fostering particular national industries and a national welfare compromise prioritized domestic socio-economic policies over trade. The compromise was epitomized in the exemptions that proliferated in GATT, which ultimately threatened to undermine the multilateral trading system. Exemptions and ‘grey area’ measures such as Voluntary Export Restraints (VERs) by developed

Re-thinking Trade Rules 49

countries became the most insidious facet of GATT. Developing states also used exemptions as a means of circumventing established principles. From its stopgap inception, the GATT adopted pragmatism as its guiding principle and it provided substantial leeway for participating nations to appease their protectionist constituencies (Goldstein, 1998, p. 141). The US had particular difficulty in balancing its free trade agenda with domestic protectionist pressures and it was among the first to insist on compromise within the GATT framework. Approximately eleven of GATT’s twenty-five functional articles provided rules about what trade restrictions a country could and could not impose. Nine of the eleven provided safeguards and exemptions (Finger and Winters, 1998, p. 372). These provisions were designed to offer legal short-term and long-term ‘outs’ for Contracting Parties. They were intended to allow a possible ‘step backward’ as part of the price of achieving two steps forward (Finger and Winters, 1998, p. 372). In keeping with the embedded liberal welfare state, safeguard and exemption measures permitted states to protect infant industries or industries adjusting to market changes. These measures also provided general exceptions for health, safety, public morals, natural resources and security (Hoekman and Kostecki, 1995, p. 162). Such measures permitted states to protect foreign exchange during balance of payments difficulties and developing countries frequently used them. The US set the precedent for embedded liberal compromise with a broad waiver from GATT commitments for agricultural products in 1955 to protect its farm program with import quotas. The EC followed suit and consequently, agricultural products were effectively removed from the GATT regime until the Uruguay Round (Lipson, 1982, p. 426). This was to prove particularly costly for developing country exports and it helped to marginalize them from the regime (Awuku, 1994, p. 86). GATT also compromised over the international legacy of imperial norms that had established preferential trade arrangements between colonies and former imperial powers. Article XXIV provided a broad exception to MFN for customs unions and free trade areas that met certain criteria ( Jackson, 1998, p. 55). For political reasons, free trade areas and customs unions were permitted to depart from MFN and from the conditions required by Article XXIV (van Dijk, 1998, pp. 34–5). As John Jackson notes, this opened a considerable loophole ( Jackson, 1998, p. 55). While industrialized countries were initially the strongest supporters of trade liberalization they used exemptions and evaded rules when their industries faced increasing competition in the 1970s and 1980s. They extended their use of nontariff barriers (NTBs) after the Tokyo

50 A Social Theory of the WTO

Round, using quantitative restrictions, surveillance of import quantities and prices, non-automatic licensing and VERs (UNCTAD T&D, 1988, p. 75). UNCTAD’s Trade and Development Report noted that developed countries increasingly used NTBs in the food and agriculture sector during the 1980s. These practices contradicted an emerging set of economic and trade norms that emphasized neoclassical economic policy prescriptions. Developing countries were particularly affected by these protectionist strategies. In the then European Economic Community (EEC), food imports affected by NTBs reached 48 percent in 1987, while in the US, NTBs on food imports increased from 22 percent in 1981 to 29 percent (UNCTAD T&D, 1988, p. 77). Industrialized states also increasingly resorted to using bilateral and unilateral measures (UNCTAD T&D, 1990, pp. 87–8). Stronger powers increasingly turned to regional trade ties in the 1980s. Developing countries were hard hit by measures that enabled developed countries to limit exports from developing countries’ most competitive sector, textiles and clothing (GATT BISD, 36S/117). Their agricultural products also fared badly. Between 1986 and 1990, domestic agricultural support averaged US$24 billion a year in the EU, US$35 billion in Japan and US$24 billion in the US. Surendra Bhandari notes that protectionism in these countries for beef and sugar alone was estimated to be the equivalent of about half the total development aid (Bhandari, 1998, pp. 90–1). The egoistic culture of the GATT enabled industrialized countries to protect declining industries with ‘safeguard’ measures for industry adjustment and countervailing duties against ‘unfair trade’ (UNCTAD, 1988, p. 77). While GATT offered temporary ‘safeguard’ tariff protection to allow industries time to restructure in response to international competition, this support often became on-going ( Jackson, 1997, pp. 181–2). Antidumping rules and countervailing duties became a particularly popular method of trade protection during the 1970s – not least because of the public support galvanized in the fight against ‘unfair trade’ ( Jackson, 1997, p. 256). Antidumping rules permitted discriminatory action and the test for injury was reasonably easy (Hoekman and Kostecki, 1995, pp. 163, 184). Countries sidestepped MFN clauses on selected goods by classifying tariff items carefully to discriminate against products from particular countries ( Jackson, 1997, pp. 162–3). Such infractions of the rules were to be expected periodically in a limited multilateral regime. The GATT regime also enabled states to circumvent national treatment provisions with creative measures such as product standards, designed to keep out competitors ( Jackson, 1997, p. 222). Exemptions for government procurement meant that many domestic

Re-thinking Trade Rules 51

industries were afforded protection under ‘buy local’ government schemes. Equally, states circumvented GATT enquiries by using exemptions under the umbrella of ‘national security’, health and safety ( Jackson, 1997, p. 231). In this surreptitious vein, trade measures to protect environmental or labor standards threatened to become a popular way for developed countries to protect their industries during the 1980s (Shaw and Hanson, 1996, pp. 138, 149). Developing countries responded by selectively acceding to GATT disciplines. They used the socio-economic framework of embedded liberalism and the procedural norms of power politicking (or poweroriented diplomacy) to secure differential treatment and exemptions from GATT rules. Developing countries argued for special and differential treatment from more powerful developed countries. They invoked the prevailing norms of nation-building and embedded liberalism, arguing that they needed special treatment to enable them to meet domestic socio-economic objectives (Ford Foundation Report, 1989, p. 28). Developing countries participated in negotiations without complying with general rules. Few developing countries bound their tariffs – less than one-third of imports were under bound rates before the Uruguay Round (Finger and Winters, 1998, p. 370). Whereas developed countries favored VERs to justify quantitative protection, developing countries used balance of payments exemptions (Finger and Winters, 1998, p. 376). Theoretically, they had special treatment under the Generalized System of Preferences (GSP), which permitted industrial countries to exempt some developing country products from MFN duties (Finger and Winters, 1998, p. 384). While a few developing countries favored by Europe selectively benefited, others excluded from these preferential agreements were particularly aggrieved. The normative frameworks of embedded liberalism and power politicking appeared to work against developed countries despite their provisions for special treatment (UNCTAD, 1986, p. 155). As T.N. Srinivasan explains, concessions for developing countries ‘achieved a lot in terms of verbiage but precious little by way of precise commitments’ (Srinivasan, 1998, p. 99). These norms helped to construct developing countries as Other to a Self of reciprocal traders. Each industrial country could define what constituted a developing country for the purposes of the GSP ( Jackson, 1997, p. 323). This unilateral quality of the GSP enabled industrial countries to withdraw the concessions at will – and indeed they did. Some granted lower tariffs or zero tariffs but hedged them with quota limits ( Jackson, 1998, p. 323). The GSP also excluded many exports most important to developing countries, such as textiles. The system meant that preferred countries could have a higher cost

52 A Social Theory of the WTO

structure than in non-preferred countries, reducing aggregate welfare (Finger and Winters, 1998, p. 385).

Procedural power politics: tier two While GATT contained the seeds of multilateralism in principle, in practice, outcomes were based on clout. Decisions revolved around power politics. Traditional theoretical approaches tend to argue that this is because regimes are simply tools created and used by strong states to advance their interests. However, it is useful to consider this in terms of the accepted ideas embodied in the regime that constructed some actors as ‘outsiders’ and therefore, without influence. While GATT did not tend to involve military conflict over trade issues as its imperialist predecessors had, frequent trade conflicts were par for the course. These were generally battled out in a backroom fashion. Although institutional practices would generally frame disputes, there was a generalized expectation of intermittent rivalry and states accepted occasional zero-sum5 behavior among Contracting Parties. This tended to benefit those countries with economic muscle. Unlike the other Bretton Woods organizations, the GATT voting system involved equal voting rights among signatories. Yet the US vision of multilateralism did not include endowing multilateral institutions with substantial autonomy (Ruggie, 1994, p. 560). While majority vote was the rule, a considerable amount of GATT business was based on achieving consensus, which usually meant on the terms of the major powers, and particularly, the US. Signatories also avoided strict voting and decisionmaking, particularly anything to do with dispute settlement, was based on negotiation and power-broking (Hoekman and Kostecki, 1995, p. 3). The practice of power-based diplomacy was particularly apparent in the way VERs and orderly market agreements were applied in the 1970s and 1980s. Exporting countries applied unilateral restraints in response to ‘signals’ from powerful, but threatened, importing countries. While they contravened GATT intent, they were particularly difficult to tackle because, obviously, no one would make a formal complaint. Clearly, neither the country that established the export restraints nor the importing country that sent the signal would complain ( Jackson, 1997, pp. 205–6). Of these restrictions, the Arrangement Regarding International Trade in Textiles (1973), known informally as the Multifibre Agreement (MFA), restricting textile exports from developing countries was particularly contentious (ESCAP, 1996, p. 11). The GATT exempted cotton textiles

Re-thinking Trade Rules 53

from its rules in 1962, predominantly to protect senescent industries in developed countries from developing country competition. This quota system was successively extended and institutionalized as the MFA in 1974 (Anderson, 1996, p. 74). The MFA provided a multilateral framework for controlling growth in textiles and apparel, involving members and non-members of GATT and became increasingly restrictive (GATT MTN.TNC/W/89/Add. 1, 1991, p. 2). The procedural norm of power politics that underpinned the MFA increasingly became a source of argument between developing countries and developed countries. The MFA essentially made a temporary exemption permanent until the WTO came into force (Hoekman and Kostecki, 1995, p. 15). By the mid-1980s, nontariff measures covered about 50 percent of the textile and clothing imports into developed countries (UNCTAD, 1988, p. 80). The arrangement allowed bilateral textile agreements as well as unilateral actions under certain circumstances. Developed countries, particularly the US and the EC, justified its extension, arguing that recession, unemployment and social dislocation made it essential to protect local textiles industries during the 1970s and 1980s. These industries were major employers of low-skilled workers and their industry associations were effective lobby groups. Meanwhile developing countries argued that the agreement undermined the very core of the international trading system (GATT BISD, 42S/233). GATT’s weak form of law, associated with its status as a provisional treaty, provided few options for countries without material power to pursue their grievances. Despite special provisions for developing countries, GATT’s selective dispute settlement procedures favored larger powers (Kuruvila, 1997, p. 178). The dispute settlement system was a predominantly diplomatic model, revolving around negotiations between conflicting parties, rather than arbitration (Petersmann, 1997, p. 66). While original plans for an ITO draft included elaborate plans for dispute settlement, GATT did not mention disputes per se. In the politically charged forum of GATT, disputes were handled by negotiation and consensus and disputing parties sat on the working groups that handled the disputes, although experts were introduced to the panels after 1955. Rather than having a working party composed of nations so that each nation could designate the person to represent it, disputes were referred to a panel that included several experts from the third GATT Contracting Parties ( Jackson, 1997, pp. 115–16). These experts were supposed to act in their own capacities and not as representatives of any government.

54 A Social Theory of the WTO

Like GATT itself, dispute settlement evolved gradually as multilateral trade principles became increasingly legitimate among states. Dispute practices were initially based on power politics. States preferred to use provisions for suspending trade concessions to restore the balance of benefits and obligations when they were violated rather than opting for punitive measures ( Jackson, 1997, p. 113). Nonetheless, the dispute system remained largely informal until the Uruguay Round. Parties used dispute panels infrequently from the 1960s until the WTO was established. Contracting Parties – particularly those with limited material power – feared that initiating proceedings would be deemed to be an ‘unfriendly act’ by other states. The system was subject to long delays and protagonists would frequently ‘shop around’ for the most agreeable dispute settlement procedures. They would also carefully select the legal provisions on which the dispute could be decided (Petersmann, 1997, p. 90). Furthermore, as the panel report had to be approved by consensus, a losing party could block or delay approval, later arguing that it was not bound to follow the report (Jackson, 1997, p. 117). Countries conditionally implemented panel findings or failed to comply and large powers opted for unilateral measures. GATT was riddled with legal failures in antidumping and countervailing duty cases and criticism mounted over the lack of transparency in dispute settlement proceedings (Petersmann, 1997, pp. 90–1).

Limited multilateralism: tier three The socio-economic and procedural norms of embedded liberalism and power politics created a culture that excluded much of the world and was limited to industrialized former Allies. Materially powerful Western liberal states continued to dominate policy as the regime excluded the Communist Bloc and, effectively, developing countries. Although participation was technically multilateral, the weak institution and its traditions of negotiated rather than rules-based dispute settlement limited participation. GATT membership remained limited to fewer than 100 Contracting Parties before the Uruguay Round and active participation remained even more limited (Hudec, 1987, p. 24). The treaty was limited to product trade as most trade was conducted between developed countries and was premised on scale economies and Fordist production methods ( Jackson, 1997, p. 53). Developing country demands remained peripheral to a system predicated on large-scale manufacturing (Awuku, 1994, p. 76). Moreover GATT neglected the products that developing countries exported. This exclusion was compounded by developing countries’

Re-thinking Trade Rules 55

focus on industrial substitution industrialization, which helped to establish their identity as protectionist Other in the trading regime. Although developing countries were involved in GATT from its inception, they quickly became disillusioned (Ford Foundation Report, 1989, p. 2). Many countries claimed they could not offer the reciprocal tariff concessions required for participation in negotiations. Moreover, developing countries could not initiate negotiations because this right was reserved for the largest exporter of the product (Tussie, 1987, p. 24). Developing countries were excluded from decision-making as well as dispute settlement (Kuruvila, 1997, p. 173). As they became increasingly marginalized in postcolonial trade, developing countries’ activity in this sphere began to revolve around opposing existing trade practices and pressuring for a new redistributive regime. Thus, within the post-WWII traditions of state building and the egoistic culture of limited multilateralism, states were considered to have particular national trade interests that might not coincide with those of others.

WTO: mutual restraint In contrast to GATT, the WTO regime is a stronger rules-based system. It also reflects an internalized understanding among its participants that their interests are interlinked. In this, it has a culture of cooperation based on a collective identity as reciprocal trader. As a legal entity, the WTO formally states its rules and it has an internal bureaucratic network to administer these. States have greater commitments and expectations about legitimate trading practices in this regime. These reflect a generalized understanding that states’ trading interests are defined in terms of the collective trading interest, given that states are increasingly dependent on international trade. The heated debates over developed country commitments at the Seattle Ministerial Meeting in 1999 are testimony to the limitations imposed by the new regime. Even great powers were limited by their need to maintain the regime’s legitimacy, given their long-standing commitment to the ideal of liberal trade. Legitimacy is defined within the trading structure in terms of disembedded liberal policies or market rationality and adherence to legal procedures. Compliance in the trading sphere is thus associated with mutual commitment and the fear of reciprocal breaches, as much as the threat of sanctions. States began to identify their own interests with those of other traders during the Uruguay Round. This was due to changing material circumstances in the trading environment, as well as to a new generalized

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understanding about the meaning of those changes. For a variety of different reasons that were particular to states, traders became more homogenous in their socio-economic organization, embracing market liberalism. At an objective level, they became more interdependent and reliant on an open international economy. This caused them to change their trading behavior. Business cycle volatility during the 1980s and growing structural unemployment in industrial countries cultivated new and ingenious ways of sidestepping GATT rules. Trade policy disputes mushroomed, particularly in the US, the EC and Japan (Dicken, 1992, p. 2). The perception of American decline prompted a growing uneasy feeling among traders that they would share a common fate if regionalism replaced multilateralism. America’s erratic approach to the multilateral trading regime and its recourse to unilateralism and regionalism encouraged developing countries to actively support the regime (UNCTAD, 1992, p. 44). States began to interpret this interdependence in a similar way, as an epistemic community helped to disseminate a new discourse of liberal economics. This system of ideas characterized traders as interdependent and sharing a common fate. The epistemic community helped to generate a collective understanding that states’ economic welfare would decline if protectionism dominated trade relations. In the new global economy, characterized by indebtedness and dominated by intra-industry trade, high-technology industries and knowledge-based industries, international trade was considered essential for economic growth. Thus, interdependence, homogeneity and a common fate linked to trade became widely recognized. Consequently, traders began to redefine their national interests in trade, increasingly expressing their interests in terms of those of the global economy and the multilateral trading regime. ‘Going-it-alone’ was no longer a serious option in an era of globalization. States also became more willing to exercise self-restraint to facilitate multilateral trade objectives. Developing countries demonstrated this by unilaterally liberalizing. While this was driven at least partially by instrumental reason, it was a necessary condition for redefining national interests and creating a collective identity in trade matters. Whereas traditional theories emphasize the material bases for policy changes during the Uruguay Round, changing ideas about trade were more important. It was the way states understood the material changes that shaped their trading behavior and redefined their roles in the trading regime. This meaning was socially produced. International economic instability during the 1970s and 1980s undermined the

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socio-economic schema on which GATT was based and it altered the dynamics of trade negotiations. This created an opportunity for actors to seek new ways of following rules of international interaction. In this climate, the old patterns of interaction reflecting power politics, the Cold War and national economics were no longer as effective. Changing technology made trade more important. This helped to produce the conditions that generated new generalized behaviors in the trading regime, and new trading identities and interests. The new technologies and production methods that emerged as largescale manufacturing declined helped to change the way countries thought about trade and each other. States at all different levels of development began to be interested in trade. This created pressure to expand the scope of the trading regime and it caused a revision of socio-economic theories based on relatively independent economies. Technological development made new forms of trade possible – particularly trade in services. Post-Fordist production methods and new developments in communications brought about syntheses between previously separate economies. Producers adopted intra-industry trade techniques, producing parts of goods in places where the appropriate factors of production were cheapest. Traditional large-scale industries such as iron and steel shifted to lower-cost newly industrializing countries. Transnational corporations (TNCs) became increasingly important in organizing global production. They eroded the strong division between raw materials providers and manufacturers, as production processes became more fragmented. Greater trade interdependence during the 1970s and 1980s had a paradoxical effect on the trading regime. On one hand, global finance and production increased protectionist pressures from within declining sectors and undermined US support for the regime. On the other hand, intra-industry trade fostered new trade links and new forms of trade. Within this new trading pattern, developing countries, increasingly important in international trade, influenced the way actors interacted during the Uruguay Round. Yet importantly, states began to believe that they were increasingly interdependent and they were experiencing an era of ‘globalization’. Consequently, there was a generalized ‘mind change’ about the kinds of economic strategies that were available to states (Henderson, 1998). Developed and developing countries increasingly came to acknowledge that their economic well being depended on expanding market access (UNCTAD VIII, 1992, pp. 53–4). Furthermore, GATT negotiators began to recognize that these new relative trading positions should be factored

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into trade rules (Takase, 1987, p. 82). Not only did the system need to include new countries, it needed to include new areas of significance in trade and to address the entropy occurring in the existing disciplines of the trading regime. Negotiators noted that developing market economies had increased their share of world exports in manufactures from 4.3 percent in 1963 to 12.4 percent by the mid-1980s. A greater proportion of these exports went to developed market economies and developing country markets were able to absorb more imports (UNCTAD T&D, 1988, p. 78). By 1985, about one-fifth of all manufactured imports into the US and Japan came from the Newly Industrializing Countries (NICs) although these countries remained outside GATT disciplines (Dicken, 1992, p. 39). The emerging discourse of globalization suggested that states were no longer masters of their economic domains and this made many states reflect more soberly that their interests were linked to those of other traders. Globalization or the perception of it produced new patterns of relationships, new policy actions and new cultural signs. The collapse of the Bretton Woods fixed currency system in 1971–73 ushered in an era of international financial speculation and a new understanding of international economics. Changing patterns of production and investment and the economic turbulence of the 1970s cultivated a sense of crisis in the competence of government. Economies were perceived to be no longer national. States – even powerful ones such as the US – found it increasingly difficult to regulate financial flows following the rise of the Euro-bond markets and nonbank financial institutions. In this environment, states believed that Keynesian economic management techniques were no longer effective. Robert Cox describes the policy crisis in this way: Governments were made to understand that a revival of economic growth would depend upon business confidence to invest, and that this confidence would depend upon ‘discipline’ directed at trade unions and government fiscal management. The investment strike and capital flight are powerful weapons that no government can ignore with impunity (Cox, 1992a, p. 28). The protectionism that preceded the Uruguay Round reflected a fundamental shift in the philosophy of governance during the 1970s and 1980s. Ostry argues: [T]he new protectionism which violated the spirit if not the letter of the overall GATT norm of liberalization, was also symptomatic of a more fundamental fault line in the post-war international system

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where the termites were breeding: the tenuous nature of the consensus concerning the respective roles of domestic policy and international rules (Ostry, 1997, p. 74). Many perceived that existing policy norms had failed in the 1970s, new policy norms emerged around disembedded liberalism and the benefits of market-directed economies for general welfare (Henderson, 1998, pp. 33, 79). An international epistemic community of economists argued that states would pay a high price, sacrificing economic growth in the new era of greater capital mobility if they chose to prioritize national social objectives over external balance or fiscal management. While the 1960s and 1970s were characterized by economic nationalism and industrialization guided by ISI, the 1980s and 1990s produced a complete policy reversal. A new conservative politics evolved, symbolized by Thatcherism in the UK and Reaganism in the US. This new conservatism was ideologically opposed to government intervention in the economy and the welfare state. It fostered a return to the classical liberal belief in free markets and deregulation. The new goal was no longer to manage aggregate demand but to restrict government spending, control the money supply, lower taxation and business regulation (Riddell, 1994, p. 20). As this trend played out in developed countries, the change was matched by what Thomas Biersteker calls ‘the triumph of liberal economic ideas in the developing world’ (Biersteker, 1995, p. 174). Changes within individual developing countries and in their relationships with other countries helped to produce homogeneity, interdependence, common fate and self-restraint among traders, helping to form a collective trading identity.6 Developing countries reassessed the ideas of underdevelopment theory. They began economic reforms, liberalizing domestic trade and investment regimes and privatizing state-owned enterprises (UNCTAD, 1991, pp. 171–3). Development discourse refocused from systemic constraints to domestic obstacles in the 1980s. Development theory began to emphasize the need to follow the basic laws of neo-classical economics. Economists argued that development could be best achieved by removing distortions and the rent-seeking practices they considered to be rife in ISI economies (Balasubramanyam, 1997, p. 16). They defined development in terms of growing productive capacity while concerns about distribution were downgraded (Biersteker, 1995, p. 178). Studies of the East Asian ‘economic miracle’ with its reliance on export-oriented industrialization played an important role in the ideational shift (Balasubramanyam, 1997, p. 11). Biersteker notes that

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the influential National Bureau of Economic Research studies on liberal exchange regimes formed a substantial part of the dominant narrative. This narrative found that the NICs were: [s]triking evidence of the bankruptcy of structuralist and dependency thinking and of the potential benefits of turning away from importsubstitution industrialization, relying more directly on market mechanisms, of reducing the role of the state in the economy, and of greater integration into the world economy (Biersteker, 1995, p. 182). These studies were supported by a series of similar development studies during the 1980s, which accorded with economic arguments in the North, as well as those in international institutions, such as the World Bank. The studies fuelled the perception that past policies had failed. Furthermore, the collapse of the European socialist bloc eliminated a rival, state-based alternative to liberal economic ideas (Biersteker, 1995, pp. 186–7). Disembedded liberal economics shaped the policy options for a new trading regime in the 1980s. Consequently, the WTO regime reflected these new ideas about the relationship between the government and markets. The new regime was stronger, more administrative, based on self-referential declarations that relied on a conception of a collective interest in trade issues (Onuf, 1989, p. 153).7

Reconstructing tier one: a new disembedded liberalism As the guardian of trade regulations established under the auspices of the post-WWII GATT, the WTO was given a mandate to enforce and extend the multilateral trading regime. In extending market disciplines to new sectors of the global economy at the expense of domestic policy compromise, the new regime departed from the socio-economic norms of GATT. While the WTO technically maintained GATT traditions and the emphasis on national sovereignty, it had a much stronger influence in establishing trade practices. John Jackson argues: It is probably impossible to overestimate the importance and profound implications that the WTO is bringing to diplomacy and international economic relations. Already various shifts in diplomatic attitudes and negotiating strategies have been reported as a result of the WTO and its new dispute settlement procedures ( Jackson, 1998, p. 8). Furthermore, the WTO regime aimed to reduce national governments ‘intervening’ in trade and, in this, the regime is more like the disembedded

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liberal regime of the nineteenth century than the embedded liberal GATT. In this sense, it was qualitatively different to the former regime of limited multilateralism. The Uruguay Round represented a fundamental shift in the three normative tiers of the trading regime. The trading regime that emerged from the Uruguay Round expressed a new set of norms or social rules about the relationship between national and international economies. Whereas the GATT had been based on an understanding that national governments should use trade policy for domestic social purposes, the new institution aimed to prevent this. The transition from the GATT to the WTO represented a shift from an embedded liberal/welfare state compromise to disembedded liberalism in which governments limited their intervention to redressing market failure. The WTO’s ‘rulesoriented approach’ aimed to adjust domestic protectionist pressures to stronger international competition (Bhandari, 1998, p. 52). It ensured international economic growth would be prioritized over national welfare objectives and it facilitated states’ efforts to make their economies competitive. Whereas the GATT regime reflected the preeminence of Keynesian economics in the international sphere, the WTO regime aimed to minimize state intervention in markets. This reflected the discursive shift towards neo-classical economic theory that occurred in the 1980s (Henderson, 1998, p. 80). The WTO embodied a ‘new consensus that open markets are the key to [income] expansion’ (WTO Focus, 1997, No. 4, p. 5). Its philosophy was that open markets, nondiscrimination among trading partners and global competition in trade benefited all countries (Hoekman and Kostecki, 1995, p. 1). In this sense, the WTO reflected the emergence of a new collective identity forming around the role of ‘reciprocal trader’. Within this framework, the WTO regime extended trade policy discipline to new sectors of the global economy such as trade in services, intellectual property and investment. Despite pressure from domestic interest groups in developed countries, the WTO aimed to prevent trade measures being used to ‘protect’ environmental or labor standards (and effectively uncompetitive industries) (GATT BISD, 49S/79). While the new WTO regime incorporated a Committee on the Environment, its brief was to circumvent environmental protectionism (GATT Focus, 1991, p. 3). GATT negotiators accepted the developing countries’ claims that the trading regime was an inappropriate forum in which to discuss labor standards, preferring to leave these to the International Labor Organization (Schott, 1994, p. 37).

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In symbolic terms, extending GATT disciplines to services, intellectual property and investment, as well as to agriculture and textiles was an important development. This symbolized a renewed commitment to the multilateral trading regime and broader participation in policy-making. While developing countries were opposed to including services, amongst other proposals, and major developed countries were opposed to including textiles and agriculture, the outcome represented broader compromise than had previously been encompassed. By incorporating agriculture into multilateral trade disciplines, the WTO regime represented a significant departure from the embedded liberal compromise that had defined GATT.8 Whereas the US had secured an exemption under GATT for agricultural services to provide price support for farm products, the new regime suggested less room for interest group politics. The new agreement made a commitment to ‘establish a fair and market-oriented agricultural trading system’ (Agreement on Agriculture, 1994). Despite strong opposition from the EU, the US and a coalition of agricultural exporters incorporating developed and developing states brought agricultural products back under the GATT umbrella.9 The agreement established a ceiling on both the value and the volume of subsidized exports of farm products, limiting subsidy wars (Schott, 1994, p. 47). This eroded the clubbish approach to protection in industries important to industrialized countries that had prevailed under limited multilateralism. Developing countries significantly benefited through the measures to eliminate NTBs and tightened waivers. Tariffs were to be reduced by 36 percent (unweighted average) and 24 percent in developing countries, with further cuts to be phased-in (Hoekman and Kostecki, 1995, p. 167). The reforms made agricultural protection more transparent and established an inbuilt program for further reforms (Agreement on Agriculture, 1994, Part XII, Article 20). Having textiles and clothing included in the system was also a symbolic victory for developing nations even though it fell short of liberalization objectives (Anderson, 1996, p. 75). It represented a wider distribution of influence in the trading regime. The Uruguay Round established that the MFA and its VERs would be dismantled progressively, returning textiles and clothing to GATT discipline over a ten-year period (Agreement on Textiles and Clothing, 1994, Article 2, Section 8). Quotas would be replaced with tariffs, bound and reduced in stages, with a monitoring body to oversee the process (Schott, 1994, p. 57).10 While the results in agriculture and textiles were incremental and delayed, these measures were a major win for developing countries.

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Kym Anderson observed: Clearly, the bringing of textiles and clothing back into the mainstream of GATT disciplines is a major coup for developing countries (and of course consumers in protected countries). But equally clearly, the implementation of this agreement is one which developing countries will have to monitor carefully (Anderson, 1996, p. 80). The Uruguay Round addressed technical restrictions that were increasingly troublesome for developing countries. The WTO aimed to prevent technical, environmental and cultural standards being used as covert protection, stipulating that they should be based on science and nondiscriminatory (Agreement on the Application of Sanitary and Phytosanitary Measures, 1994, Article 2). The new socio-economic framework of disembedded liberalism provided developing countries with new resources to influence trade outcomes concerning environmental issues. The WTO established that environmental motives should not be used to force developing countries to adopt Western environmental standards – particularly in the production process (Weiss, 1996, p. 103). The new regime provided relief from countervailing measures and curtailed the use of subsidies, which were increasingly difficult for developing countries to sustain.

Tier two: from power politics to legalism The WTO regime represented a new trend in deciding policy directions. Whereas major powers had dominated this process by virtue of their economic muscle, formal laws became the accepted practice. The GATT was an interim administrator constructed around diplomacy and negotiation but the WTO became a legal entity, underpinned by administrative rules. The idea behind a formal rule-oriented approach was to ‘establish longer-range principles on which nations and subordinate entities within nations can reasonably rely’ ( Jackson, 1988, p. 7). Rules can provide a greater degree of predictability and stability, a higher sense of fairness and usually greater efficiency because administrative officers can handle much of the system’s operation. In establishing a rules-based, adjudicative system rather than a powerbased system, the WTO enabled deeper multilateralism or superlateralism. Although narrower in scope than the originally proposed ITO, the WTO reflected the prevailing view that a multilateral approach was the fairest way of facilitating trade. The WTO Charter established the explicit legal

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authority for an organization, a Secretariat, and a Director-General and staff. Small or weaker countries had considerably more opportunity to influence the new regime and this increased their active participation (Kuruvila, 1997, p. 173). In extending WTO disciplines to areas concerning developing countries, such as textiles, as well as tightening loopholes over environmental protectionism, the new regime diffused power and legitimacy among negotiators. While laws were not always followed, rules or norms influenced the decision-making process even where they were not backed with material force ( Jackson, 1998, p. 9). Even those powers with considerable material capability increasingly had to negotiate with weaker powers in order to achieve a legitimate outcome. For example, developed countries accepted the separation of negotiations in services from those in goods at the behest of developing countries, such as India. Indeed former WTO Director-General Renato Ruggiero claimed: Developing countries – and the economies in transition – now rightly see the WTO as their organization. More than two-thirds of today’s 100 full members of the WTO are developing or transition economies, as are the great majority of those in the process of becoming members … [This] reflects the adjustment – not before time – of the multilateral trading system to a fundamental shift in the economic geography of the world (WTO Focus, 1995, p. 4). The WTO’s legalistic framework sought to limit trade restrictions that were previously allowed for domestic social policy reasons. In so doing, it closed loopholes and it bound developed and developing countries more tightly into its framework. Whereas previous GATT rounds liberated trade with a ratchet effect, leaving intransigent issues aside, the WTO ensured such issues would be addressed. It had a built-in agenda for future work, stipulating a five-year deadline to begin further negotiations on trade in services and agriculture (WTO Focus, No. 6, 1995, p. 10). The new world trade regime did not substantially alter the international system of distribution. The potential remained for less powerful countries to abstain from voting on certain issues in deference to countries with a higher stake in the economic outcome. Moreover, countries continued to violate multilateral trade rules from time-to-time. Yet, as Jackson observes, domestic laws are often violated ( Jackson, 1998, p. 10). This does not mean they are unimportant in defining legitimate behavior. International laws, such as those embodied in the WTO, provided a legitimate framework for action. Countries, cautious of their international

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reputation or keen for reciprocal respect of rules, follow rules when domestic politics or industry circumstances suggest protectionist policies might otherwise prevail. Moreover, given that states increasingly recognized that they would all be harmed by a collapse in the multilateral trading regime, they acknowledged a collective incentive in self-restraint. Recognizing that GATT practice was weighted in favor of large traders, the Uruguay Round sought (with limited success) to limit antidumping and to tighten rules on government procurement. This aimed to reduce bullying, and it clearly departed from the procedural norms of power politics (Hoekman and Mavroidis, 1996, p. 197). WTO rules provided a more effective way to specify legitimate antidumping measures and it required greater transparency to prevent such measures being used as covert protectionism. The new regime established a sunset clause with regular reviews (Bhandari, 1998, p. 83). The Government Procurement agreement also tried to eliminate covert protectionism, limiting scope to discriminate in favor of domestic products or companies against products or suppliers from other signatory countries.

Tier three: superlateralism Whereas policy influence in the GATT regime had been concentrated among a select group of developed countries, the Uruguay Round negotiations produced a deeper multilateralism. Although the WTO regime retained the commitment to consensus voting in many issue areas, thus preventing bloc voting, it provided stronger rules with which less powerful countries could oppose discriminatory measures. In this, the regime represented a shift from limited multilateralism to superlateralism. This change in culture was based on an emerging recognition of a collective interest in multilateral trade. While the GATT regime had adopted a pragmatic approach to national interests, the WTO regime recognized a common interest in trade liberalization in all kinds of economies. This emerged from the shift in thinking about whether embedded liberal policies were effective in the modern economy. It also reflected developing countries’ cooperative trade policies, favoring multilateral liberalization. In establishing a stronger legal framework and dispute settlement system, as well as a legal organization with a built-in liberalization agenda and training facilities, the WTO was a qualitatively different regime. While much of the pro-trade behavior that produced change in the trading regime began as instrumental policy, its effects went deeper. In producing a new generalized understanding about roles and relationships

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in trade, the cooperative trade behavior ultimately produced a new collectively defined national interest and it changed the distribution of influence in the regime. The WTO framework legitimated the goals of liberalization for both developed and developing countries, providing new constraints and resources for agents in negotiations. The WTO regime reflected consensus (albeit a nascent one) that an open trading regime was broadly beneficial to developed and developing countries in comparison with the alternative: regionalism and protectionism. This suggests a shift away from a regime based on egoistic protectionism to a cooperative trading regime, which structures interests as collective. Many of the WTO regime’s innovations addressed developing countries’ concerns in a way that they had not been addressed in GATT. The WTO regime prohibited NTBs such as VERs that had proven costly for developing countries and tackled other areas of concern previously excluded from GATT. The formalized dispute settlement system also enhanced developing country involvement and multilateral control over policy. Its legal framework provided a streamlined way for less powerful trading states to tackle trade disputes, diversifying control over trade issues (Kuruvila, 1997, pp. 172, 178). Furthermore, the disembedded liberal framework provided a legitimate way for developing countries to pursue greater market access in developed countries. It also enabled them to more effectively oppose veiled protectionism. This recalls Giddens’s observation that structure provides resources that actors draw on during interaction with others. The new procedural norms of legalism and the socio-economic framework of disembedded liberalism made the WTO a stronger and deeper multilateral regime. The trading system remains a forum, in which its actors debate, argue and justify as well as signal moves. However, these practices are no longer dominated to the same extent by materially powerful states (Caporaso, 1993, p. 79). Legalism more strongly defines legitimate actors and legitimate behaviors in the trading regime. A new dispute settlement system is integral to this multilateralism. Whereas the old dispute settlement process was largely a process of negotiation, the WTO codified the process and made much of it automatic. The mechanism provides for compulsory jurisdiction for trade in goods, services, trade-related investment measures and intellectual property rights, leading to legally binding decisions and appellate review proceedings within a tight timeframe (Petersmann, 1997, p. xiv). The Dispute Settlement Understanding aims to prevent WTO members from unilaterally deciding that a member has violated trade rules

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(Bhandari, 1998, p. 82). Disputes proceed automatically through argument of the facts and consideration of an issue, with pre-set deadlines and requirements for an outcome (Thomson, 1996, p. 18). The decision, having been circulated to the parties for comment, is then adopted automatically unless the membership decided by consensus vote not to adopt it. Dispute panel findings could be enforced with financial penalties, such as sanctions (Kuruvila, 1997, p. 175). This is in stark contrast to GATT practice that required the membership to officially adopt the report, enabling member states to veto the ruling. While the material deterrent provided by sanctions is practically limited to large traders, legitimacy as an honest trader is important. Since its establishment in 1995, the system has been tested by developing countries and in a number of cases the developing country complainant has won its case against a major developed country.11 Developing countries have dramatically increased their recourse to dispute settlement since 1994, suggesting they have regained some faith in the system (Srinivasan, 1996, p. 2; Kuruvila, 1997, p. 172). By 1997, developing country participation in the WTO dispute settlement system (through cases initiated by them) had increased by 28.5 percent compared to GATT (Kuruvila, 1997, p. 179). The trend to legalism transformed the relationship between developing countries on trade issues. Developing countries started to employ the system against each other, pointing to the regime’s greater legitimacy in this quarter. For example, a dispute between a group of Latin American developing countries and the US against the Lome Convention was resolved to the letter of GATT (1994) law (Chaytor, 1998, p. 264).

Conclusions A social theory analysis of the WTO shows that it is stronger than the GATT and it has a new set of social rules governing trade interactions between states. The WTO reflects a socio-economic schema based on disembedded liberalism, procedural norms based on legalism and a new culture: a deep multilateral or superlateral culture. This culture redefines states as reciprocal traders, defining states’ trading interests collectively. The new trading regime reflects a change in the distribution of influence over policy outcomes. This has become particularly important because, as the next chapter will explain, the US no longer fulfills its expected function as the hegemonic architect of trade liberalization.

3 US Trade Policy: Mixed Messages

The previous chapter argued that the shift from the GATT to the WTO represented a structural or cultural shift from limited multilateralism to superlateralism. Whereas the former was characterized by exemptions for national socio-economic purposes, the latter represented selfrestraint and cooperation, and an emerging collective identity. The new WTO regime embodied new socio-economic and organizational norms, based on disembedded liberal principles and legalism that made it stronger than its predecessor had been. A new structure of roles emerged during the Uruguay Round to produce this change. On one hand, the US, the hegemonic architect of the GATT regime, no longer fulfilled its role by following pro-trade policies. Instead, the US adopted increasingly egoistic trade policies during the round and the US and the EU began to focus on regional trading blocs. On the other hand, developing countries adopted pro-trade policies during the round, capitalizing on America’s historical commitment to the trading regime. Developing countries established a new role as reciprocal trader. As the US adopted aggressive unilateral policies, its hegemonic identity in the multilateral trading regime eroded. As this behavior was repeated with increasing frequency, it no longer represented the intermittent derogations that could be expected in a moderately cooperative egoistic regime. As previous chapters have explained, as new behaviors are repeated they erode old identities. A new identity was formed as other actors established new expectations of the US, and the US began to see its new identity reflected in their responses. This antitrade behavior caused other states to reassess their definitions of the situation through a repeated process of reflected appraisals. It caused them to reassess their relationships in terms of regional trading identities, such 68

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as the Association of South East Asian Nations and issues-based alliances, such as the Cairns Group of agricultural exporters1. It also caused them to reassess their role within the multilateral trading regime. However, this turnabout did not cause the trading regime’s cooperative character to regress or to become more fragile as many neorealists suggested it would (cf. Gilpin, 1987). Instead, new systemic conditions – a sense of homogeneity in socio-economic policies and interdependence among traders, a sense of common fate and a commitment to selfrestraint – started to form a collective identity around the principles of disembedded liberalism and legalism. Regime change is path dependent, so other states were able to use the established social rules of multilateralism to pressure the US to limit its protectionist actions, trading on its previous reputation as a trade advocate. This helped to redefine the boundaries between the multilateral trading Self and the former protectionist outsiders. Traditional theoretical approaches that employ material and behavioral explanations of regime change tend to overemphasize the role of the US in the transition from the GATT to the WTO regime. These theories generally understand regimes in material and instrumental terms: regimes are constructed by materially powerful states to advance these states’ preformed interests. Neorealism and neo-Marxism particularly, and to a lesser extent, neoliberalism, suggest that a hegemonic state is usually required to build a cooperative trading regime (cf. Gilpin, 1987; Krasner, 1982). In this context, the international trading regime predominantly reflects American preferences. Neorealism predicted that the multilateral trading regime would weaken as the US declined and it resorted to unilateralism. Equally, neo-Marxists have suggested that the trading regime would become more conflictual as US hegemony declined. These theories also suggest that while developing countries might seek to change the regime, they do this to undermine rather than strengthen the regime’s market mechanisms (Krasner, 1985). Even neoliberalism, which suggests that states without material power might help to sustain the regime, underestimates the nature of this ability. However, emphasizing the role of the hegemon offers limited insight into the process of regime change during the Uruguay Round. The stronger multilateral trading regime cannot be directly linked to US muscle during this period. Neither is the way developing countries came to change their role as opponents of the multilateral trading regime explained purely in behavioral terms, emphasizing new incentives to support the regime. The US policy undermined the multilateral trading regime during the 1980s (Destler, 1992, pp. 208, 211). Although the US had advanced

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disembedded liberal trade rules in initiating the new round of GATT negotiations in 1986, it pursued embedded liberal policies, protecting politically sensitive national industries. It also resorted to unilateralism and bilateralism and power politics in trade negotiations. In emphasizing its regional trading relationships through the North American Free Trade Association (NAFTA) with Canada and Mexico, the US signaled a cooling ardor for multilateralism. US trade policy fundamentally challenged evolving WTO norms in important areas. America’s response to competition in key industries and its shift towards environmental protectionism particularly undermined the multilateral trading regime’s developing social rules built around disembedded liberalism and black letter law. Not only did the US breach rules with measures such as quotas and environmentally motivated sanctions; it circumvented multilateral rules by using VERs, for example (Rhodes, 1993, p. 152). In simple terms, traditional theories overstate the links between the multilateral trading regime and US power. While the US was instrumental in establishing the GATT regime, it played a more complex role in the formation of the WTO regime. US protectionism and the rise of regionalism that threatened to leave many developing countries out in the cold weakened and established the social structures in the trading regime. Traditional trade postures were destabilized, providing opportunity for a new culture, based on new trading practices and different socio-economic and procedural principles. The relationship between the US and the multilateral trading regime fundamentally changed during the Uruguay Round. The US was no longer in a position of clear policy dominance, particularly given its contradictory trade policies. It could not have been the primary architect of the stronger, rules-based regime that emerged. Certainly, the final agreement was made possible by the Blair House agreement on agriculture between the US and the EC. Yet decision-making throughout the round was much more interactive, involving broader negotiations than had been the case in the GATT regime (Ricupero, 1998, p. 16). Although the US no longer fulfilled its role as the patriarch of the trading system, the regime strengthened rather than declined as neorealism and neo-Marxism generally predicted it would. Instead, the way the US exercised its power in trade was conditioned by new accepted social rules of economic management, industry support and legal procedure, and by developing countries that used these rules to influence America’s policy. In other words, shared understandings and interaction between

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countries shaped the way they could influence each other in trade matters. The first part of this chapter explains the traditionally understood links between American hegemonic power and the formation of the GATT regime. The second part of the chapter considers American policy during the Uruguay Round in the context of a new normative framework emerging in the WTO regime. US policy fundamentally contradicted the emerging social framework of disembedded liberalism and legalism, and the trend towards a more extensive multilateral culture. The US consistently pursued embedded liberal exemptions and power politics. In important areas such as the environment and strategic trade, US policies threatened to derail the multilateral trading regime. This policy shift reflected new social rules and policy options at the domestic level of states, and the rapid spread of competing norms such as environmentalism and strategic trade measures. Importantly however, while a powerful proponent or ‘norm entrepreneur’ touted these ideas, their spread was limited because they were at odds with other prevailing social practices of trade. While neorealist and neo-Marxists might have predicted such a policy shift in the US, these theories do not explain the process through which the regime was concomitantly strengthened. In emphasizing that material power is the essence of regimes and in overlooking the way both structure and agents are continuously reproduced, these traditional theories have overestimated the opportunities powerful states have to influence policy outcomes. Even states with considerable material power are conditioned by what is generally considered to be legitimate social practice. Their preferences and identities are not pre-formed and autonomous, but are partially constructed by system-wide distributions of social knowledge. These identities are sustained through social interaction. Sure, it is possible for an actor to stand apart from prevailing rules but this does not often increase the power to change the rules. Rules can become more firmly defended by other members of society when they are opposed. Social rules and their effects only change over time.

Part one: theoretical traditions linking the US and GATT For traditional theoretical approaches generally, the strength of the multilateral trading regime is integrally linked to America’s role as the

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defender of free trade. This commitment was associated with America’s Cold War status as the guardian of ‘the free world’ (Baldwin and Krueger, 1984, pp. 7–9). In this context, the GATT regime is seen to be constructed around Cold War objectives and the regime’s rules generally reflected the idiosyncrasies of US politics. Yet America’s egoistic national trade policies helped to establish the GATT regime’s limited and rivalrous character. The US established exemptions, such as that for agriculture, for national social purposes, establishing the embedded liberal socio-economic framework. It also adopted power politics rather than following the letter of the law in the trading realm. These social practices helped to define developing countries as the protectionist Other in contradistinction to a Self of egoistic and rivalrous multilateral traders in the GATT regime. In this sense, the US was a strong norm entrepreneur, peddling the social practices that underpinned the GATT regime. Hegemonic stability theorists have argued that the US, given its preponderance of economic and military power after WWII, sacrificed its short-term interests to create an open trading regime. As Krasner notes, such a system was consistent with America’s economic interests and with its political goals. He claimed this was so ‘not only because such a trading regime would be informed by liberal principles but also because trade was associated with growth, political stability, and anti-communism’. Such a system required many trade-offs against specific national economic interests but these could be sustained while America’s policy-makers retained sufficient institutional autonomy or freedom from pressure groups (Krasner, 1982, p. 33). In this framework, the hegemonic distribution of power in the international system led to the GATT regime being formed. Neo-Marxists also argue that the US, as the most economically competitive state, created the post-WWII trading regime to enable resources to be concentrated in core states and to benefit its capital-owning class. Like the neorealists, world systems theorists argue that this regime is a function of an international system: international capitalism. They explain the liberal trading regime as a function of the long-run cyclical rise and fall of particular core states (Chase-Dunn, 1978). In this schema, America as the predominant core state created an open international system to help expand markets for goods produced in the core states. Equally, Gramscian neo-Marxists suggest that the multilateral trading regime is part of the hegemonic superstructure facilitating American penetration of the periphery. While neoliberals acknowledge that regimes can become autonomous of their hegemonic founder if other states value the regime as a means

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of maximizing utility, they note that a hegemon forms the regime. Neoliberals, such as Keohane, have argued that America used its hegemonic power to create the postwar liberal trading regime. The US, with a comparative advantage in high value-added goods, had much to gain from a stable, open economic order, even though this required sacrificing short-term national economic interests (Keohane, 1982, pp. 50–2). Such a state provided positive incentives for cooperation, although other states might show greater commitment to the regime over time as they benefited from greater international stability and lower transactions costs (Keohane, 1984). So neoliberals, like neorealists, explain the post-WWII trading regime as a product of American economic predominance although they do not argue that the regime continues to depend entirely on American hegemony (Keohane, 1984). In the neoliberal explanation, America’s strong competitive position in almost all sectors prompted it to seek new markets through negotiated trade liberalization. This economic influence enabled the US to set the trade policy agenda. True to its commitment to defend the Western world from Soviet expansionism, the US accepted less from its trading partners than it gave, in an attempt to bind them in a global free trade alliance (Schoppa, 1997, p. 51). Furthermore, in the neoliberal schema, the GATT hybrid or embedded liberal system was linked to America’s New Deal experience (Burley, 1993). Some neoliberals argued that the regime’s exemptions and notions of reciprocity broadly reflected historical patterns in the US that had made it largely protectionist before 1945. Neoliberal analyses suggest that while GATT norms might have limited US policy freedom, American preferences were still well represented within these rules (Finlayson and Zacher, 1983, p. 313). Keohane and Nye claimed that while power diffusion had reduced America’s ability to establish international regimes, ‘major international regimes continue to reflect US interests, by and large, because of US influence in establishing and perpetuating them’ (Keohane and Nye, 1989, p. 279).

The US backs another horse At first glance, those theorists who regard the new multilateral trading regime as an expression of US interests could find comfort in the Uruguay Round negotiations. The US was indeed partially responsible for initiating a new round of GATT negotiations. Nonetheless, neorealists and neo-Marxists noted that American policy was increasingly predatory and many argued that America was losing its grip on

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hegemony during the 1970s. This inexorable decline was expected to mark the beginning of the end for stability in the multilateral trading regime (cf. Krasner, 1982). Nonetheless, in the early 1980s, the US and Japanese governments advocated a new round of GATT negotiations to stem the protectionist tide. The irony that both traders were major offenders in this regard was apparently lost on both (Congressional Quarterly, June 16, 1984, p. 1428). Nonetheless the plan gelled with calls from within the GATT bureaucracy to make full use of the GATT as a negotiating forum. A senior GATT official, John Croome, observed that former GATT chairman Olivier Long told member governments as early as 1979, that the best way of overcoming protectionism was to maintain the Tokyo Round’s momentum (Croome, 1995, p. 7). However, given that GATT had no provisions for regular political-level meetings of member governments, only national governments had the power to generate this momentum. GATT’s Consultative Group of Eighteen advocated a Ministerial Meeting in 1982 and this precipitated hopes for a new round, about which the US was enthusiastic. Subsequently, in November 1983, the then Director-General Arthur Dunkel invited an independent panel to identify the fundamental causes of the regime’s problems. The resultant Leutweiler Report recognized that some parties were increasingly sidestepping GATT rules. The report urged for a new round to be launched with the aim of bolstering the GATT trading system and levering open world markets (GATT, Leutweiler Report, 1987). On one hand, American policy was consistent with the norms of disembedded liberalism and legalism that were emerging within the trading regime. On the other hand, the US simultaneously adopted policies that threatened this normative framework. This perhaps reflected domestic political conflict over America’s role in the post-Cold War world. Before the Uruguay Round, the US government aimed to expand the GATT negotiating agenda to include new issue areas. The US argued that technological change and the growing importance of high technology sectors and services were marginalizing GATT rules. The US also started to rethink its agricultural subsidies as the government budgetary position weakened. The GATT Leutweiler Report argued that agriculture should not receive special treatment in the GATT regime. In light of these factors, the US began to urge other traders to phase out agricultural export subsidies, to convert NTBs to tariffs and it argued for more precise definitions of domestic subsidies and health standards (GATT DOC. MTN.GNG/NG5/W/118, October 25, 1989).

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The US also argued that multilateral trade rules should ensure trade in services, intellectual property, investment and agriculture was not unduly restricted (Congressional Quarterly, November 20, 1982, p. 2889). In fact, the US went so far as to declare that it would not participate in a round that did not include discussion of these new issues (Ford Foundation Report, 1989, p. 89). The US was particularly keen to prevent restrictions on international investment and to develop international minimum standards of protection for patents, trademarks and copyrights (GATT BISD, 28S/75–76). It also brought negotiations to a standstill late in the round, indicating that it would walk away from negotiations if the EU did not commit to dramatic reductions in agricultural subsidies (Odell and Eichengreen, 1998, p. 202). At the 1982 Ministerial Conference, the US aimed to generate an ‘international consensus’ about negotiations on services and used supporting academic research to boost its case (Gibbs and Mashayekhi, 1988, p. 82). This followed dramatic growth in the trade of informationbased business services (Feketekuty, 1998, p. 80). Despite vigorous opposition from developing countries and some developed countries, the US secured a commitment for national studies on trade in services. This process led to negotiations on liberalizing trade in this sector, seeking to establish a multilateral framework of principles and rules for trade (GATT BISD, 33S/28). The Uruguay Round negotiating agenda also included the other proposed sectors, as well as areas of concern to developing countries. While the GATT Director-General Arthur Dunkel initiated a position of Legal Affairs within the Secretariat, the US had played a role in the trend strengthening the legal structures in the trading regime (Hudec, 1998, p. 114). The US advocated strengthening the dispute settlement system that had evolved under the GATT and argued to extend its extension to new issues such as services (Gibbs and Mashayekhi, 1988, p. 82). While the US had opposed developing countries’ demands for legalistic solutions to ‘sensitive political and economic problems’ in the 1960s, it reversed this policy in the 1970s. The US Trade Representative (USTR) presented its legal claims to the GATT in the tradition of US domestic policy, saturating the deliberating panel with legal argumentation (Hudec, 1998, pp. 109–12). During the Uruguay Round, the US advocated greater use of rules although significant policies circumvented the prevailing GATT rules (UNCTAD T&D Report, 1990, p. 87). America was also among those developed countries that pressed developing countries to become more fully integrated into the multilateral trading system (GATT BISD, 34S/73). It acknowledged that

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agreements in new sectors, and indeed, a new GATT would be ineffective if developing countries did not participate in the negotiations (GATT BISD, 32S/23–25). This reflected the growing sense of interdependence in the international trading system described earlier. Recognizing the growing importance of developing countries, the US accepted limited agreements in controversial sectors and it acceded to developing countries’ demands in particular issue areas. Developing countries’ concerns about liberalizing trade in services meant that the GATS agreement was limited in scope (Stahl, 1994, p. 434). Nonetheless, the agreement established a comprehensive set of rules for preserving and expanding market access for internationally traded services. It created an integrated framework for addressing interrelated policy issues affecting global companies producing services, as well as commitments relating to trade in information-based business services. In this sense then, US policy was moving towards deeper multilateralism although many Americans bitterly opposed the implications. Growing interdependence associated with changing trade patterns influenced the evolution of a collective identity, despite America’s shift to egoistic national protectionist policies. This enabled developing countries to secure a commitment to greater mutual self-restraint. America’s economic and policy communities were among the vanguard of those that embraced economic liberalism after the perceived policy failures of interventionism in the 1970s (Henderson, 1998, p. 32). The American Government’s decision to suspend the convertibility of the dollar, heralding a new era of floating exchange rates, represented an important policy fissure in the embedded liberal agenda. The shift to disembedded liberalism is consistent with prevailing socio-economic norms within the US during the 1980s. These practices built on what Judith Goldstein observes to be a historical belief in free trade in the US (despite periods of protectionism), dating to the Interbellum and WWII (Goldstein, 1988). New economic ideas (particularly about development) emanated from the centers of world power (cf. Biersteker, 1995). These centers included the US and the UK as well as international financial institutions. Leading research universities in the US and Europe were behind the push for a policy reversal, forming an international epistemic community around the norms of economic liberalism or disembedded liberalism (Biersteker, 1995, p. 186). Well-funded think tanks provided a rationale for pursuing market liberalism and their research de-legitimated welfare state objectives.

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America’s Chicago School of economists took the lead in developing an intellectual framework for extending market disciplines (cf. Stigler, 1971). This epistemic community advocated economic liberalism, which implied limiting government intervention in markets and assigning government merely a strategic role in establishing a framework for markets to function effectively.2 During the 1980s and 1990s, international economic discourse was characterized by a ‘consensus’ (or universal convergence) around the objectives of fiscal discipline, adjustment of public expenditure priorities, tax reform, financial liberalization, exchange rate adjustment, privatization, deregulation, and support for property rights (Biersteker, 1995, p. 178). For neorealism and neo-Marxism, the stronger rules-based system, like its predecessor, is an arm of US policy. Some suggest that the shift towards a stronger regime was a matter of the US flexing its muscle, given that the new regime extended GATT disciplines to new issue areas that were important to the US economy (Cox, 1992a). Gramscian neoMarxists argue that in the case of the Uruguay Round, the US state was responding to a shift towards internationalized production. Some suggest that the multilateral trading system represented a core-wide solution to managing international order. Having relative autonomy from capital, the state acted in the long-term interests of its international capitalists, securing open markets for transnational capital (Cox, 1992a). World systems theorists suggest that while US hegemony had peaked in 1967, its decline had not necessarily coincided with the rise of a new hegemon (Hobson, 2000, p. 140). Neorealists also emphasize that America achieved significant gains relative to other traders in the international system by extending trade disciplines to the service sector. In this analysis, neo-Marxists and neorealists deny that multilateralism has given any real power to peripheral countries in the international trading regime. These approaches concentrate on the economic benefits that flowed to US multinational companies particularly from improved market disciplines in services and investment (Odell and Eichengreen, 1998, p. 202). However, the fact that the US economy gained from the Uruguay Round does not explain the process through which disembedded liberalism and legalism prevailed in the trading regime. Developing countries had long opposed developed country duress over market trade rules. Traditional theoretical accounts of the trading regime overlook

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the proactive way developing countries used these new norms during the Uruguay Round. Even neoliberalism, which argues that changes in incentives and changes in states’ preformed interests might cause states to support a regime after its hegemonic founder declines, underestimates the way regimes reconstruct power and influence. In emphasizing the material bases of regimes, traditional theories tend to understate the conditioning effects structures have on powerful states. They also underestimate the contingent and uncertain nature of regime change. American trade policies were not unequivocally pro-trade. Indeed, they reflected limited multilateralism and protectionism that favored national industries at the expense of the international trading regime throughout the Uruguay Round. This was despite domestic influences in favor of disembedded liberalism – particularly concerning monetary policy. Competing economic interests, such as America’s strong lobby for environmental protectionism and its labor-intensive industries, equally might have prevailed in the Uruguay Round. Domestic economic uncertainty undermined America’s ability to lead the charge towards a new and stronger liberal trade regime when it mattered. The US lost its surplus in high technology goods in the early 1980s, precipitating arguments for ‘strategic trade policies’ relying on selective protection. This limited America’s ability to lead the push for multilateral trade liberalization (Tyson and Zysman, 1983, p. 32). Policymakers were preoccupied with losses to traditional sectors such as automotive manufacturing and the possible benefits of strategic trade practices (Congressional Quarterly, January 29, 1983, p. 212). Therefore, other factors apart from America’s predominance in trade and its support for multilateral liberalization must have influenced the strengthening of the WTO regime. America’s new policy approach helped to erode its previous identity as hegemonic free trader. Other states began to regard the US differently in trade negotiations, and the US began to internalize this new identity. American policy-makers increasingly questioned the US role in underwriting the multilateral trading regime (Congressional Quarterly, January 29, 1983). This provided space for developing countries to renegotiate their own identities as more powerful negotiators in the trading regime.

Culture clash The Uruguay Round was therefore characterized by public recognition of a shift in America’s role as leader of the international multilateral

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trading regime (UNCTAD T&D, 1990, p. 87). American actions in the trading regime in this period reflected embedded liberal norms, which emphasized national social objectives over free trade, power politics and unilateralism or bilateralism. This was in contradiction to America’s post-WWII internationalist identity, which sponsored the formation of GATT. While some argued that America’s unilateralism was a trick designed to achieve multilateral liberalization, America’s trading partners generally understood it to be a departure from multilateralism (UNCTAD T&D, 1990, p. 87). America adhered to the norms of embedded liberalism, power politics and unilateralism in important issues during the Uruguay Round. These norms fundamentally challenged those that ultimately prevailed in the new WTO regime. In advocating strategic protection in high technology sectors and trade measures to protect environmental and labor standards, the US undermined the principles of market liberalism. In this respect, many proclaimed that the US had abdicated its leadership role, as hegemonic stability theorists and neo-Marxists had predicted (Congressional Quarterly, November 20, 1982, p. 2890). This was particularly evident in its use of unilateral trade policies to protect strategic industries and its growing pressure for environmental protectionism, such as that epitomized by the Marine Mammal Protection Act (MMPA) (Congressional Quarterly, May 24, 1997, p. 1192).

Aggressive unilateralism and strategic trade policy America’s recourse to unilateral trade measures to punish ‘unfair traders’ via Section 301 of the Trade Act of 1974 during the 1980s continued the traditions of intermittent conflict, which were to be expected in a limited multilateral regime. However, this policy fundamentally contradicted the norms of disembedded liberalism and legalism that were emerging elsewhere. Domestically, competing political imperatives challenged America’s commitment to the norms evolving in the multilateral trading regime. This was particularly evident in high technology sectors such as semiconductors in which the US had traditionally defined its economic leadership (Congressional Quarterly, March 26, 1983, p. 610). America’s macroeconomic imbalance exacerbated traditional sources of trade tensions, such as high levels of industrial unemployment, resistance to structural change by declining industries and high-cost agricultural protection. Trade conflicts simmered as America became defensive about its large fiscal deficits, high interest rates and the growing trade deficit caused by a rising US dollar (UNCTAD, 1987, p. 189).

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In a climate of inflation, oil price shocks, exchange rate volatility, slow world trade and technological change, many Americans no longer identified with the nation’s post-WWII identity as free trade leader (Malmgren, 1985, p. 2). Strong industry and consumer advocacy groups, as well as Congress members, argued that the US was hog-tied by its commitment to the trading regime, undermining the country’s economic and social interests. America’s identity as hegemon was redefined during this period as ‘declinists’ focused on its relative decline in important sectors. In this context, many theorists pointed to America’s historical trade surplus that had become a rapidly expanding trade deficit by the early 1980s. Declinists juxtaposed this trade imbalance against growing unemployment in traditional industries, such as automotive manufacturing, that struggled to match cheaper import competition (Congressional Quarterly, January 29, 1983, p. 213). Jobs in manufacturing declined for three consecutive years, setting new postwar records for unemployment and while manufactured exports fell 17.5 percent between 1980 and 1982, imports rose by 8.3 percent (Nivola, 1986, p. 581). With growing unemployment in smokestack manufacturing industries, popular support for trade liberalization waned. Furthermore, the loss of high-tech industries to Japan and the visibility of some Japanese governmental support led to a rash of complaints that American firms faced ‘unfair trade’ (Bhagwati, 1991, p. 19). As a US Senator warned in 1982, ‘The US is not going to stand by and be the only free trader left in the world’ (Congressional Quarterly, November 20, 1982, p. 2890). At a domestic level, this trading identity, emphasizing national over multilateral concerns, was built on a perceived dichotomy between local and international interests (Aaronson, 1994, p. 48). In the early 1970s, it became popular to denounce America’s apparent comparative economic slide on other countries’ economic policies, particularly those of Germany and Japan. The perception spread that US living standards were under attack from ‘foreign competition’ – particularly through competition from low-wage countries. America began to favor unilateralism and its regional trade association with Canada and Mexico, rather than multilateralism. In this climate, multilateralism seemed too difficult and perhaps, even too altruistic a pursuit. America’s national interest began to be defined closer to home, that is, more egoistically. Disembedded liberal norms, favoring market liberalization, came into sharp conflict with embedded liberal norms favoring support for national industries. Market-oriented actors, such as the former chair of the Federal Reserve board Paul Volcker, clashed with bureaucrats and

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politicians advocating defensive trade policies (GATT Focus, No. 51, p. 1). Nonetheless, by the 1970s, domestic public opinion increasingly questioned America’s support for the multilateral trading system. The 1971 Williams Commission on international trade and investment policy found ‘an increasing concern that our government has given insufficient weight to our economic interests and too much weight to our foreign political relations’ (Cohen and Meltzer, 1982, p. 129). Many domestic actors blamed America’s declining comparative advantage on ‘unfair’ competition from its trading partners (Congressional Quarterly, January 29, 1983, p. 212). Consequently, despite its stated commitment to multilateralism, US trade policy shifted to unilateral measures to protect flagging industries during the 1970s and 1980s (UNCTAD, 1990, p. 87). Indeed, Peter Cowhey and Edward Long note that by 1980 that the US had shifted its focus from opening Japan to US imports to restricting Japanese imports (Cowhey and Long, 1983, p. 178). During its first two years of office, the Reagan administration imposed VERs on Japanese auto imports and European steel imports, narrower quotas on sugar imports and further restraints on textiles and clothing (Bartel, 1984, p. 29). This occurred despite the Administration’s public commitment to free trade. Greater reliance on unilateral sanctions against ‘unfair traders’ symbolized a shift to aggressive unilateralism: power politics over multilateral due process (Bhagwati and Patrick, 1990, p. 34). Rather than extending market disciplines, the US increasingly opted for sleight of hand protection in the form of nontariff barriers and strident ‘fair trade’ measures such as antidumping and countervailing duties (UNCTAD, 1990, p. 87). US policy also undermined the transition to stronger laws in the trading regime. It blocked attempts to establish a legal body to administer GATT laws during the final stages of the Uruguay Round (Inside US Trade, December 18, 1992, p. 5). Although initially amenable to Canada’s proposal for a multilateral trade organization (MTO), its enthusiasm for the institution and tighter dispute settlement measures waned as the round neared completion (Stiles, 1996, p. 145). The US came forward in 1992 with major reservations about a multilateral trade organization and offered a proposal to conclude the Uruguay Round without one. It was concerned that smaller countries might dominate decision-making in the GATT under a one-country, one-vote system. The US also opposed provisions in the proposed MTO that would have allowed a majority of countries to interpret specific provisions of the agreement. This provision would have bound all parties to amendments adopted by a twothirds majority of the Ministerial Conference or the General Council

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(Inside US Trade, December 18, 1992, p. 5). Instead, the US proposed a looser organizational structure. However, the US ‘gradually accepted that it had lost the argument (against a multilateral trade organization) and eventually lifted its reservations’ (Winham, 1998, pp. 355–7). A final agreement regarding a WTO was finally reached, but only with modifications designed to limit the new organization’s decision-making authority. While the organization was a dramatic step forward for multilateralism, the amendments protected powerful negotiating countries from a simple majority vote on crucial matters such as those changing the rights and obligations of the parties (Jackson, 1997, p. 46). The US initially agreed to prohibit unilateral action in exchange for hard-fought agreement from the EC to automatically adopt GATT panel reports (Winham, 1998, p. 352). Section 301 of the 1974 Trade Act epitomized the US policy commitment to unilateralism (Bhagwati and Patrick, 1990, p. 2). This policy, and its offshoots, Super 301 and Special 301 of the 1988 Act, assumed increasing importance during the 1980s as Congress sought to pressure the President and the trade representative (USTR) to tackle unfair trade. Section 301 of the 1974 Trade Act expanded the President’s authority to respond to foreign ‘unfair trade practices’ and originally required the USTR to investigate all formal complaints about trade barriers by private parties (Bayard and Elliott, 1994, pp. 26–7). It enabled the President to suspend or withdraw previous trade concession and impose duties or import restrictions against the exports of a targeted country. This policy shift was driven by the perception in Congress that the Reagan Administration had badly neglected US trade policy in the early 1980s and the continuing trade imbalance with Japan (Bayard and Elliott, 1994, p. 23). Unilateralism reflected pressure on Congress members from constituents with declining industrial comparative advantage and the increasing sense in Congress that the social good required support for troubled industries. Political structures had been developed to reduce protectionist pressures on Congress following the disastrous protectionist era of the 1930s. However, as the US hit economic turbulence in the 1970s and its competitors appeared to ‘catch-up’ to it in terms of trade competitiveness, pressures emerged to change these systems. The ‘fair trade’ thrust was also associated with the Democratic Party’s presidential campaign (Congressional Quarterly, July 9, 1983, p. 715). Section 301 policy was progressively strengthened during the 1970s and 1980s, undermining America’s legitimacy as the architect of multilateral trade rules. By 1984, Congress legislated to make the USTR more aggressive in prosecuting cases of ‘unfair trade’ competition. In 1988,

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the Omnibus Trade and Competitiveness Act made USTR action and retaliation against ‘unfair traders’ mandatory in certain cases. It stiffened the deadline for taking action, allowing a maximum of eighteen months before retaliation could be imposed even if the international dispute settlement process were not completed (Bayard and Elliott, 1994, pp. 28–9). Under the new Section 301 or Super 301, the USTR was to identify priority practices and priority countries to target. If an eighteenmonth period of negotiations failed to produce satisfaction, the US was required to retaliate (UNCTAD T&D, 1990, p. 89). The law also demanded that the Administration pursue ‘mutually advantageous market opportunities’, in conflict with liberal trade theory. So in 1989, the US cited: Brazil for balance-of-payments restrictions and government procurement restrictions; Japan for restrictions on supercomputers and satellites, as well as technical barriers to trade; and India for trade related investment measures (Bhagwati and Patrick, 1990, pp. 3–4). While Section 301 was legal under GATT rules in principle, it was applied in a way that contravened GATT’s dispute settlement procedures during the 1980s, as the US pursued Section 301 retaliation without authorization (Bhagwati and Patrick, 1990, p. 2). Its discriminatory punitive tariffs violated MFN obligations. Super 301 legislation technically required the USTR to advise the GATT Secretariat when a GATT right was at stake. However, in aggressively pursuing ‘unfair traders’ and in unilaterally assessing this unfairness, the US departed from GATT discipline (UNCTAD T&D, 1987, p. 190). Clearly, the new trade measures, although not always outside the GATT rules, represented a major challenge to the multilateral norm embodied in the regime. Although American economists and bureaucrats were important in disseminating disembedded liberal norms, a competing epistemic community was important in undermining them. While liberal trade theory increasingly influenced the international structures of world trade, a countervailing theory gained in stature in the US. Studies of America’s ‘trade gap’ and export competition, particularly in its signature high technology sectors, precipitated a new school of trade theory to countervail the prevailing liberal trade theory (Sassoon, 1997, p. 7). America’s unilateral policies reflected a mercantilist view that trade surpluses were associated with international power while deficits were associated with international trade weakness. These policies were removed from neo-classical economic theory which showed that in a world of capital mobility and floating exchange rates trade imbalances were largely immune to treatment by trade policy measures (Destler, 1992, p. 225).

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Concern over America’s apparent decline and intense interest in the way the Japanese had achieved technological development prompted a new socio-economic framework for policy. This was fundamentally opposed to disembedded liberalism. Trade theorists such as Paul Krugman and Laura D’Andrea Tyson began to argue for a new understanding of international trade, incorporating a dynamic notion of comparative advantage (Krugman, 1986). This approach challenged the dominant theory that concluded that government intervention in markets and trade reduced national welfare. Whereas liberal trade theory was premised on static comparative advantage, Japan’s in areas such as semiconductors appeared to demonstrate that industry policy could have an enduring effect on a nation’s competitive position (Zysman and Tyson, 1983, p. 39). New trade theorists argued that governments should nurture domestic industries with important positive externalities or benefits for the society as a whole. They therefore advocated a greater role for government in developing comparative advantage in strategic sectors through industry policies. Studies of Japanese success, particularly in high technology exports, highlighted the coordinating role of the Japanese government. These studies focused on the role that the Japanese Ministry of International Trade and Industry (MITI) had played in nurturing high-technology industries. MITI established cooperative laboratories with engineers from normally competing companies and the Japanese government provided R&D incentives and restricted foreign access to Japanese markets (Okimoto et al., 1984, p. 20). The semiconductor industry, in which the US was apparently losing its technological lead, became an example of the need for government support for industries with steep learning curves, large-scale economies and positive externalities (Congressional Quarterly, March 26, 1983, p. 610).

Semiconductors: fighting fire with fire The embedded liberal traditions of the GATT which gave countries the leeway to protect national industries provided room for America to ‘strategically defend’ its semiconductor industry with quantitative trade measures in the 1980s. Neo-Marxists and neoliberals might characterize this policy as part of a struggle between national and international capital or between senescent industries and developing sectors (Cox, 1992a). Nonetheless, it can also be seen as competition between America’s interest in multilateral trade and disembedded liberalism, and its egoistically defined national interests. This undermines the prevailing perception that the strong WTO regime simply reflects US interests.

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Clearly, American interests and its trading identity were complicated and its traditional role in the trading regime was eroding due to repeated antisocial behavior in the trading regime. This left space for new influences within the trading regime. The US increasingly used measures outside the GATT to protect its senescent labor-intensive industries. It claimed that this was necessary to prevent market disruption and to preserve social stability (GATT BISD, 10S/19, 30S/75). Domestic industry advocates invoked strategic trade theory and notions of ‘fair trade’ to justify VERs to protect America’s semiconductor industry (Bhagwati, 1991, p. 17). The US ‘fair trade’ policy represented recourse to power politics over legal process against Japanese commercial competition. As I.M. Destler argues: American anxiety about foreign competition grew as the relative position of the United States declined. The striking success of nations like Japan sowed seeds of doubt about liberal doctrine. Here was a nation which seemed committed to a mercantilist trade strategy, pushing exports and discouraging imports, and doing very well indeed … [US business-people alarmed about direct foreign government support to chosen industries] came to see an unfair world where other nations played loose with the rules and nice guys were likely to finish last. They were willing to compete but they demanded a ‘level playing field’: not one tilted against the United States (Destler, 1986, p. 7). In contrast to the battle to protect smokestack industries that were large employers, the battle for the semiconductor industry was largely over the symbolic importance of this sector to the American economy. In this sense, US interests were increasingly characterized as being consistent with strategic trade policies rather than trade liberalization (Congressional Quarterly, November 20, 1982, p. 2890). US dominance in this industry reflected the nation’s status as a technological leader, as semiconductors were the ‘crude oil of the high technology sector or the indispensable core of advanced technology’ (Okimoto et al., 1984, p. 3). Semiconductors had a wide range of product applications, making this technology essential to competitiveness across a spectrum of industries, such as telecommunications, computers, machine tools and robotics. The semiconductor industry was also the engine room of American security. It provided the technological basis for the nation’s lead in areas such as nuclear missiles, precision-guided munitions, cruise missiles, surveillance and early warning system, communications aircraft (Okimoto et al., 1984, p. 3).

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As the Japanese share of the US semiconductor market surpassed that of the US in the mid-1980s, moving towards the US share of the world semiconductor market, American firms accused Japanese firms of unfair trade practices (Krauss, 1979, p. 267). American firms accused Japanese firms of dumping cheap products on US markets to increase their market share and they complained that Japan’s vertically integrated industry structure prevented US exports from penetrating the market. Consequently, US administrators sought to tackle ‘unfair trade practices’ with voluntary export agreements through which Japanese industries agreed (under threat of coercive duties) to limit their exports. Agreements struck in 1982 and 1983 set a global floor price for chips and set a market share target for US semiconductors in Japan (UNCTAD T&D, 1987, p. 191). The Semiconductor Industry Association (SIA) also capitalized on the newly invigorated Section 301 to file a case against the Japanese producers.3 Three US firms filed antidumping suits and the International Trade Commission issued a preliminary finding that Japanese firms had harmed the American industry (Krauss, 1994, p. 273). The Commission accused the Japanese government of protecting its domestic industry with nontariff barriers. The US semiconductor industry claimed the Japanese industry had violated its 1983 VER commitments by allowing informal barriers to remain (Krauss, 1994, p. 268). American industry groups argued that the Japanese had dumped exports in foreign markets as the yen appreciated after 1985 (CED, 1991, p. 33). The USTR and the Department of Commerce estimated that the Japanese market barriers were blocking around US$10 billion in export sales (Destler, 1986, pp. 107–8). Contrary to the norms of multilateralism and the procedural norms associated with dispute settlement, the US resorted to Section 301. The US increasingly pressured Japan to enable American firms to increase their market share. This pressure succeeded in forcing the Japanese to monitor export prices and third-country markets. The Japanese government also agreed to provide firm-specific manufacturing data to the US Commerce Department to determine whether firms were selling below production cost. In a secret addendum to the agreement, the Japanese recognized the American claim to a boost in market share to 20 percent within five years (Krauss, 1994, p. 275). When this produced no improvement in market share, the US Senate and the House passed unanimous resolutions urging retaliation. This forced the President to levy a 100 percent tariff on electrical devices worth US$300 million (UNCTAD T&D, 1987, p. 191).

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The departure from multilateral rules undermined America’s role as a leader in trade negotiations (Bhagwati and Patrick, 1990, pp. 4, 12). Developing countries particularly claimed that this behavior represented a threat to multilateralism and consequently India refused to negotiate with the US in 1989. An UNCTAD trade and development report concluded that: The continuation of attempts at resolving trade tensions through bilateral channels with threats and retaliations would only exacerbate the situation, erode the credibility of the international trading system and reduce prospects for sustained investment and growth. It is therefore imperative that trade conflicts and disputes be resolved in an orderly fashion, with agreed multilateral principles and rules. This calls for a commitment by States to utilize fully the process of liberalization envisaged in the Uruguay Round (UNCTAD T&D, 1987, p. 191). Whatever motivated US trade policy during this period, it had the effect of eroding the nation’s identity as free trade leader in trade negotiations. Its antitrade measures eroded the Self that had been constructed in the limited multilateral trading regime of the GATT.

Tuna–Dolphin: fishy trade practices America also resorted to unilateral retaliation and power politics in environmental issues during the 1980s and 1990s, further favoring egoistic policies during the Uruguay Round. In employing trade restrictions to support environmental standards, American trade policy fundamentally threatened the disembedded liberal norms that ultimately prevailed in the international trading regime. As in the case of semiconductor policy, America’s decision to impose sanctions against foreign tuna imports to prevent dolphins killed by net fishing represented a role change in international trade. Given the strength of these environmental norms domestically, the US was in no position to single-handedly strengthen the trading regime. Rather than pushing for greater reliance on market mechanisms and a reduction of GATT exemptions, American policy pursued national social objectives in the spirit of the embedded liberal GATT regime. America’s contradictory trade policies and environmental protectionism suggest it is not enough to argue that a state pursues its interests or that a regime might be in a particular state’s interests. National interests are

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rarely clearly defined. For example, they might be defined narrowly or broadly. Furthermore although domestic policy conflicts were reflected in US trade policies, America’s new policy interests did not predominate in the trading regime. In adopting trade sanctions for environmental purposes, American policy-makers appeared to support the competing norms of radical environmentalism over trade liberalization and those of ‘fair trade’ over ‘free trade’. Environmental rationality represented a fundamental challenge to disembedded liberal policy prescriptions. Environmental rationality challenged the growth paradigm implicit in the free trade agenda. Liberal trade theorists argued that developing countries should be able to exploit their lower preferences for environmental protection as a form of comparative advantage (Eglin, 1998, p. 251). Environmentalists argued that this would result in lower global environmental standards – particularly if environmental subsidies could be challenged under GATT law. Some analysts also argued that liberal trade policies would worsen environmental problems because they would expand consumption (Anderson and Blackhurst, 1992, p. 5). Environmental concerns fed fears that the new GATT regime would prevent states from pursuing their national sovereign interests. This precipitated a popular movement against the GATT regime in the US. US consumer advocate Ralph Nader’s comments are representative of these concerns: US corporations long ago learned how to pit states against each other in a ‘race to the bottom’ – to provide the most permissive corporate charters, lower wages, pollution standards, and taxes. Often it is the federal government’s role to require states to meet higher federal standards … There is no overarching ‘lift up’ jurisdiction on the world stage … The Uruguay Round is crafted to enable corporations to play this game at the global level, to pit country against country in a race to see who can set the lowest wage levels, the lowest environmental standards, the lowest consumer safety standards (Nader in Roessler, 1998, p. 223). Hence a coalition of environmental organizations proposed GATT reforms, including a provision that would allow pace-setting governments with high environmental standards to block imports from countries with lower standards or harmful processing methods (Vogel, 2000, p. 77). In proposing trade exemptions for environmental purposes and resisting GATT dispute settlement procedures, America further compromised

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its legitimacy as Uruguay Round leader. Environmental groups working through Congress and the Courts were set against the US Trade Representative, favoring the reduction of trade measures for environmental purposes (GATT BISD, 35S/406). Furthermore, America’s policy stance over environmental protectionism was juxtaposed against strong support in developing countries for market solutions to environmental problems. In adopting an environmental protectionist strategy, the US became a target in trade negotiations as one of the worst offenders in breaching its disciplines. Developing countries argued that they would not support American attempts to extend the trading regime’s disciplines if developed countries such as the US did not adhere to the existing standards (Ford Foundation Report, 1989, pp. 178–9). America’s policy added to the litany of reasons why developing countries, in particular, felt that the multilateral trading system, left unchanged, would consistently fail them (Bhagwati, 1990, p. 150). In levying unilateral sanctions against Mexican tuna imports in a bid to save dolphins from net fishing in the 1970s, the US set in train a struggle over the trading regime’s fundamental principles. The dispute’s resolution, proscribing unilateral trade measures to enforce environmental standards, was held up as a conflict between the objectives of trade liberalization and environmentalism. Environmentalists seized on this to argue that domestic environmental policies were incompatible with evolving trade ideas. Laws with mixed economic and social purposes were likely to fall before a challenge under trade rules (Roessler, 1998, p. 221). The Tuna–Dolphin dispute also highlighted the potential problems of having multilateral rules for countries with completely different values. A developing country, Mexico, had successfully challenged America’s trade sanctions that were designed in the early 1990s to protect dolphins caught by tuna fishers under GATT rules. Although the pragmatic embedded liberal norms had allowed exemptions from free trade rules for social policy purposes, the Tuna–Dolphin case demonstrated a shift away from such flexibility. Consequently, many Americans argued that where national environmental standards differed from the international, national rules should prevail – just as national employment objectives had under the embedded liberal GATT. They also championed the right to America’s power to support these values, even where these values contravened multilateral rules. They claimed that ‘Americans should make American law’ (Congressional Quarterly, August 2, 1997, p. 1863).

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Yet while America’s MMPA contravened GATT rules, strong legal principles prevailed over power politics. Two GATT panels, one in 1991 and the other in 1994, deemed invalid US embargoes on tuna imports caught in ways that also killed dolphins. The first involved Mexican tuna imports and the second involved an intermediary embargo on tuna exported from Mexico to the EC for onward sale in the US. The ruling that the US MMPA contravened GATT principles highlighted an evolving trend in the multilateral trading system to limit national technical standards as barriers to trade (The Economist, 1993, p. 21). Although America was committed internationally to using market mechanisms rather than trade measures to protect the environment, the government faced considerable domestic pressure for environmental protectionism. The MMPA was originally passed in 1972 to keep populations of marine mammals from being depleted below certain levels. As reports surfaced of dolphins being killed by tuna fishers in the 1970s and 1980s, protests against these practices became a popular cause (Congressional Quarterly, June 1997, p. 518). The US Government introduced laws to prevent American tuna fishers from incidentally killing or injuring more than 20,500 dolphins per annum (Schoenbaum, 1994, p. 367). It also banned tuna imports caught with methods that killed or harmed dolphins. Tuna imports from countries with kill rates more than 1.25 times the average of the US fleet were embargoed, as were imports from ‘intermediary nations’ that brought dolphin-unsafe tuna for export to the US. The legislation particularly affected purse seine fishing because marine mammals drown in nets used to catch tuna. While the law struck a chord with environmental groups in industrialized nations wanting to use trade policies to increase global environmental standards, it met resistance from the epistemic community of trade economists. The measure was (controversially) interpreted as an attempt by the US to unilaterally pressure Mexico to adopt similar tuna fishing standards to its own. It also met strong resistance from developing countries arguing for the right to set their own environmental standards. Developing countries appealed to market-oriented economic theory to prevent trade measures being used to pressure other countries to increase their environmental standards. They also argued that trade would benefit rather than harm the environment. The US imposed an embargo on imports of commercial yellowfin tuna products harvested with purse seine nets in 1990, pending a decision on whether the embargo complied with MMPA standards. The action initially affected Mexico, Venezuela, Vanuatu, Panama and Ecuador.

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The final measures in April 1991 embargoed tuna and tuna products imported from Mexico, Venezuela and Vanuatu. Mexico took its grievances to a GATT panel, arguing that the tuna embargo was inconsistent with GATT laws.4 The ensuing struggle over GATT and environmental norms intensified opposition within the American public to the Uruguay Round and to the emerging disembedded liberal GATT regime. Importantly, the GATT panel supported the developing country claims and reaffirmed multilateral trade rules against what were perceived to be aggressive environmental regulations. The US defended its position by claiming that the MMPA was an internal regulation. The US sought to appeal to GATT exemptions on the basis that the embargo aimed to protect an exhaustible resource (Pearce, 1995, p. 84). Yet the GATT dispute settlement system did as its environmental opponents suspected it would: it arbitrated in favor of trade concerns (Uimonen and Whalley, 1997, p. 77). The first GATT panel in 1991 found in favor of Mexico, determining that the embargo related to how the tuna was produced, rather than the sale of the product. Furthermore, the panel found that the import bans violated Article XI of GATT, prohibiting quantitative restrictions. In a statement environmentalists took to be symbolic, the panel determined that GATT did not permit signatories to protect the environment extraterritorially. The panel interpreted the conditions for exemptions narrowly and it found that the burden of proof for ‘necessary environmental protection’ remained with the country imposing sanctions. The GATT panel also considered that exemptions to protect life or health only applied to the jurisdiction of the country taking the action. Resorting to power politics over legal procedure, the US ignored the panel findings, adding to the widespread perception that the multilateral regime was waning (UNCTAD, 1990, p. 87). A second panel, convened in 1994 also rejected the environmentalist cause. However, the second panel found in contradiction to the first, that there was nothing to prevent GATT exemptions applying extraterritorially to protect exhaustible resources, or human, animal or plant health. Nonetheless, the second panel agreed that the measures must be primarily aimed at or necessary to conserve the resource. Hence, for environmental critics, the panel affirmed the GATT as a hermetically sealed system ‘limit[ing] the extent to which one can take account of developments in international law outside the GATT with which the international trading system is connected’ (Cameron et al., 1994, p. 16). The panel reaffirmed that it was important to interpret the exemption clauses narrowly in ‘a manner that preserve[d] the GATT’s

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basic objectives’. It claimed the MFN principle would be seriously impaired if the article were interpreted to allow Members to use trade measures to force other countries to change their policies within their jurisdiction. Controversially, the panel concluded that trade measures taken to force other countries to change their policies were not primarily aimed at conserving a natural resource (Pearce, 1995, p. 86). It also concluded that the measures were not primarily intended to effect restrictions on domestic production or consumption. Consequently, the panel seemed to disallow any second-best import measures to protect the environment and it opposed using sanctions and other measures against products directly linked to environmental damage (Uimomen and Whalley, 1997, p. 78).5 Environmental groups took this as evidence that the GATT/WTO system could not accommodate international environmental agreements or unilateral measures such as the 1992 Rio Declaration on Environment and Development (Cameron, 1994, p. 17). While the GATT facilitated exemptions from its rules for issues that were important to domestic societies, the Tuna–Dolphin case firmed resolve among Uruguay Round negotiators – particularly those from developing countries – to change this. Developing countries bitterly opposed allowing trade protectionist measures for environmental purposes (GATT BISD, 33S/256). The Tuna–Dolphin issue confirmed that neo-classical economic solutions to trade problems predominated in the trading regime. The regime’s rules were strengthened and it came to embody disembedded liberal norms and deep multilateralism. In this process, the US was as much the regime’s demon as its defender. Whereas the US had traditionally sought to accommodate domestic political concerns within the trading regime, it could not do so as easily in the 1980s. By the time environmental issues were being thrust onto the Uruguay Round agenda in 1992–93, a strategy of seeking exemptions was no longer legitimate. Developing countries were able to appeal to America’s past commitment to the multilateral trading regime to circumvent its egoistic approach to environmental and social policies. Disembedded liberal norms became the legitimate means of pursuing trade and social objectives. The US ultimately agreed that the WTO regime should limit the use of environmental trade measures and advance trade and income growth as a means of improving such standards in developing countries. This helped erode existing barriers between the respective identities of developing and developed countries and to establish the collective identity as multilateral trader.

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Despite strong domestic pressure to continue to protect national industries, and to use power politics where necessary to do it, America’s opportunity to pursue such policies was limited by the emerging culture of superlateralism in trade matters. In appealing to the collective interest established in the multilateral trading regime, developing countries helped to secure a commitment from the US to use the GATT’s dispute settlement mechanism rather than Super 301. It also helped to prevent environmental protectionism such as the Tuna–Dolphin laws from being permissible under WTO rules.

Conclusions In examining America’s contradictory policy during the Uruguay Round, it is difficult to understand the process through which the regime came to be strengthened merely by examining America’s preformed preferences. Regardless of its intentions and material policy incentives, the US eroded its role as free trade advocate during the Uruguay Round through antitrade behavior. It was the way that developing countries interpreted this change and responded that influenced the way in which the regime was changed. This change was historically contingent and it evolved through interaction. It could not have been understood merely by examining states’ preformed trade interests or their material capabilities, as traditional theories seek to do.

4 Trading Roles

Just as the US did not fulfill its expected role as the defender of free trade during the Uruguay Round, developing countries did not play their accustomed role as opponents of the multilateral trading regime. America’s role as hegemon in the trading regime changed during the late 1970s and 1980s, reconstructing its identity and interests in the trading regime. Whereas America’s liberal trade policies had underpinned the trading regime since WWII, it adopted generally egoistic behavior during this period. At the same time, it began to focus more exclusively on developing regional trading relationships with Canada and Mexico where its interaction was greater, rather than focusing on the multilateral trade regime. Nonetheless, other countries did not adopt egoistic behavior in response. Rather, as other countries, developing countries in particular, came to understand America’s new role, they reassessed their relationships and their own roles within the trading regime. In contradistinction to the US, developing countries adopted cooperative trade policies during the Uruguay Round. The trend towards deepening regionalism in key trading areas such as NAFTA and the EU prompted many of them to look at deepening their regional relationships. Political leaders in Asia and in Africa particularly sought to define these relationships in terms of common cultural experiences rather than purely in terms of trade symmetries. Rather than turning away from the multilateral trading regime, developing countries, as a negotiating group, continued to engage within it. In the process, they began to form a new role or identity as traders rather than opponents of trade. In order to do this, they had to adopt policies of self-restraint in trade policies and to redefine their interests in terms of a collective interest in trade liberalization rather than individualistically defined interests. 94

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Before we get to the story of developing countries’ role reversal, it is important to understand this story in the context of regime change. It is possible to explain the role reversal at a number of levels. One might focus on the processes occurring within states that prompted them to change their trading behavior. One could consider the domestic political, cultural and economic tides that turned, reconstructing the terrain on which trade negotiations were played out. However, my aim here is to understand effects of changing trading relationships on the international structures of world trade. That is, the intention is to understand how sustained changes in behavior changed the frameworks for understanding trading relationships and negotiating positions in the multilateral sphere. Therefore the focus must be on the way countries interacted and represented themselves (and each other) in the trading regime, and the way that their new behavior changed the roles they played negotiators in the multilateral trading regime. It is difficult to measure cultural change and collective identity. However, Wendt’s idea of explaining a culture in which collective identity predominates is useful. He identifies four key causal conditions, which are generalized among a group of actors to create collective identity. These key causes are: homogeneity, interdependence, common fate and self-restraint (Wendt, 1999, p. 343). The ability of states at a systemic level to identify with each other is influenced by the extent to which they consider themselves to be like other traders or whether they have homogenous socio-economic philosophies. A sense of common identity in a population of trading states might also be associated with a sense of interdependence as well as a sense that the states share a common fate in trade. Of course, no collective identity is possible without a commitment to self-restraint that enables states to expand their moral boundaries. In this sense, states might restrain egoistic behavior to pursue a collectively defined goal instead, such as economic growth through trade. None of these key causes or conditions determines collective identity formation but they all influence the kinds of behaviors that states adopt over time. Individual states can produce these generalized conditions in a variety of ways and we can look to domestic factors to explain them. A detailed analysis of how these conditions are created within states to influence regime change is beyond the scope of this book. Instead, I will focus on the effect of this change on the trading culture. A culture based on collective identity can only be formed if these causal conditions prevail objectively or materially and they are also subjectively recognized by states. In this sense, then, ideas are critical to the formation of collective identity. New ideas about economic

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management and development disseminated through epistemic communities were particularly important in forming a collective identity in the multilateral trading regime during the Uruguay Round. In this context, identity change is measured partly by discursive repositioning in negotiations. Developing country negotiators moved away from representing their countries as opponents of trade liberalization, adopting the line that they were effectively greater proponents of trade liberalization than the traditional developed country advocates. Identity change is also measured in terms of actions; the trade liberalizing measures adopted by developing countries during this period, which helped to redefine their respective roles in the trading regime. This is not to suggest that all developing countries adopted exactly the same negotiating stance or even the same trade policies. However, important groups of developing countries that had traditionally spoken for developing countries displayed these signs of adopting a new role in international trade. The imagined and real phenomenon of ‘globalization’; the decline of Keynesian economics; the end of the Cold War; and the 1980s’ debt crisis prompted many developing states to adopt pro-trade policies. Increasingly they began to realize that every 0.7 percent increase in their exports generated as much income as they received each year in aid (Oxfam, 2002). Conditioned by this new framework of ideas, developing countries unilaterally liberalized their trade policies, causing both developing and developed countries to reassess their respective trading roles. To some extent, material factors contributed to this process. Clearly, the debt crisis forced many to rely on assistance from the World Bank and the IMF, which was conditional on liberalization (UNDP Occasional Paper 3, p. 9). This also changed the profile of winners and losers within states and hence the political economy of trade policy. Developing countries generally focused on getting better access for trade, rather than restricting trade. This also entailed a recognition that economic success relied on cooperation or greater interdependence. In the process of adopting pro-trade policies and redefining their roles as advocates of trade liberalization, these countries adopted a measure of self-restraint in policy. In supporting the multilateral trading regime, countries needed to ensure that their policies in a range of areas were broadly consistent with international rules on subsidies, intellectual property and health and safety standards, to name a few areas affected. Making these commitments, moving towards a cooperative approach to economic growth through trade and away from the defense of national industries, can be seen as a measure of emerging collective identity in the trading realm.

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The effects of developing countries’ repeated representations as reciprocal traders helped to change expectations about appropriate behavior. States’ representations in GATT documents throughout the Uruguay Round suggest that trade rules and dispute settlement procedures became increasingly legitimate. An increasingly broad range of negotiators – particularly from developing countries – highlighted the need for collective restraint and adherence to the rules to enhance global welfare (GATT BISD, 24S/50; UNCTAD, 1992, p. 53). Trade statistics also show that most developing countries significantly liberalized their trade regimes during the late 1980s and 1990s (World Bank, 2001, p. 1). During this period, trade interests and rational action began to be defined in terms of the collective group of multilateral traders. Although the new trading behaviors might have reflected coercion or instrumental reason initially, over time, developing countries internalized their new role as reciprocal trader. The ‘trader’ mask stuck to their faces.1 These identities, and the new interests they constructed, became selfsustaining. Repeated interaction and changing behavioral patterns changed ‘who’ states were and what they wanted in trade negotiations. This is complex learning. Thus, whereas rationalist theories suggest that social learning merely implies behavioral changes in response to new incentives, this analysis of the Uruguay Round suggests that the effects of social interaction go deeper.

Developing countries as the Other in GATT Before the Uruguay Round, developing countries had established themselves as outsiders from the multilateral trading regime. They became the Other to a Self of rivalrous free traders. In the GATT regime, both developed and developing countries adopted egoistic policies in keeping with the norms of embedded liberalism that advocated exemptions for national purposes. These policies reinforced the shared understanding of developing countries’ dependence on developed countries in trade, and consequently, the power differential between them. While ten of the twenty-three original GATT members were developing countries, they quickly lost faith in a system that maintained exemptions for protection against their most important exports (Hudec, 1987, p. 23).2 An examination of GATT documents reveals momentum among developing countries during the 1960s and 1970s for redistribution and preferential treatment in the trading system (cf. GATT BISD, 5S, 29S). Rather than concentrating on equality of trading opportunity, developing countries emphasized the need for ‘unilateral tariff reductions

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wherever they could be made by industrially advanced countries on products of interest to the less-developed world’ (GATT BISD, 11S/181). Developing countries relied heavily on GATT exemptions for balanceof-payments reasons from the outset but increasingly applied them in a discriminatory manner (GATT BISD, 26S/35). Developing countries also relied on infant industry exceptions under Article XVIII of the GATT (Hudec, 1987, p. 26). In emphasizing their need for exemptions and special treatment, developing countries established an identity within the GATT as protectionists. This occurred predominantly through a process of complex social learning during which developed countries came to understand developing countries as outsiders. This identity or role was established as developing countries positioned themselves to ask for concessions in trade negotiations, and also as they established strongly protectionist trading regimes. Developing countries internalized this identity as they came to see themselves as developed countries did: as protectionist suppliants. Developed countries began to notice that developing countries were raising prohibitive tariffs under GATT rules, having failed to bind them in the early GATT years. Developing countries also generally used acrossthe-board surcharges for balance-of-payments purposes, even though such measures were of questionable legality (Hudec, 1987, p. 31). Prior to the Uruguay Round, average ad valorem import charges (tariff type charges) in a large selection of developing countries were two-to-three times greater than those imposed by industrial countries. The average rate applied by developing countries was 10 percent but this concealed large differences between individual countries: for example, the rate for Cyprus was 69 percent in 1982, 41 percent for Burma, 36 percent for India and for Zaire 49 percent. Meanwhile others such as Kuwait had a rate of 0 percent and Singapore 1 percent (Finger and Olechowski, 1987, pp. 48–9). As Table 4.1 shows, the rate of protection was strongly negatively related to the level of income. Developing countries’ emerging identity as the protectionist Other also can be seen in the way developed countries’ began to lose interest in applying GATT disciplines effectively to developing countries. This was particularly so with respect to developing countries’ use of GATT exemptions to protect infant industries. GATT lawyer Robert Hudec explained: Developed countries would continue to insist on a certain rigour with respect to formalities, but their interest in actual discipline soon

Trading Roles 99 Table 4.1 Average ad valorem import charges of selected developing countries 19823 Type of country Low-income Lower-middle income Upper-middle income High-income oil exporting All a

Customs dutiesa

Other charges

26 10 6 1 9

2 2 1 0 1

Duties collected as a percentage of c.i.f. import value.

Source: IMF 1986 in Finger and Olechowski, 1987, p. 49.

began to wither. The declining interest was not the product of any new demarche by developing countries. Nor was it ever formalized in the legal texts of the GATT. It was, rather, the product of a slowly growing sense of hopelessness and frustration, more an attitude than a consciously articulated policy (Hudec, 1987, p. 29). So, as developed countries confirmed their collective view that developing countries were peripheral to the multilateral trading regime, they helped to reinforce and reproduce developing countries’ identity as the subaltern ‘Other’. A body of accepted development theory helped to sustain these respective roles during the 1960s. This literature found that developing countries’ interests were at odds with a liberal trading regime. It argued that developing countries required assistance to build industries to reduce their reliance on volatile primary products markets.4 This accorded with prevailing postcolonial nation-building objectives that were designed to reduce dependence on the West. Developing countries argued that accepting MFN rules would perpetuate their poverty (UNCTAD, 1983, p. 26). Instead, they sought to develop infant industries behind tariff walls, embracing state-led industrialization and ISI (Chilcote and Johnson, 1983, p. 12).5 The theory of import substitution developed in the 1960s proposed that insulating high value-added infant industries would help developing countries become stronger. It argued that important national industries should be protected from competition with imports until they became strong enough to compete and to reduce developing countries’ reliance on price-sensitive commodities.6 The GATT regime, which focused on reducing tariffs on industrial goods, did little to improve conditions in markets that concerned developing

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countries. The embedded liberal regime was ineffectual for developing countries trying to develop industries based on low-wage labor-intensive industries and agricultural commodities. Such development strategies were complicated by developed countries’ restrictions on imports of textiles and agriculture (GATT BISD, 9S/122). And, as Chapter 3 suggested, developing countries’ competitive position was also hampered by the formation of regional trading blocs in developed countries (GATT BISD, 11S/182). It is not surprising then, that developing countries claimed they had ‘inherited a system in the design of which they had played little or no part, and which was intrinsically biased against their interests’ (UNCTAD T&D Report, 1994, p. 157). They cited the mechanics of tariff conferences as evidence that they were excluded from the GATT regime. Many countries claimed that they could not offer the reciprocal tariff concessions required for entry to negotiations. Moreover, because only the largest exporter of a product could initiate negotiations, developing countries had to hope for spillover from MFN provisions after developed countries negotiated concessions (Tussie, 1987, p. 24). In groups, such as the UNCTAD and the Group of 77 (G77), developing countries argued for greater exemptions from market disciplines (UNCTAD, 1979, pp. 1, 2). These groups had limited empathy with the trading goals of the North. They pushed for a redistributive NIEO and recognition in GATT of the need for special action outside GATT disciplines for development purposes. In response to this pressure, the GATT increasingly formalized the developing countries’ suppliant identity with provisions for special and differential treatment (GATT BISD, 13S/2–5, 18S/71–87). The 1965 Part IV Amendment on Trade and Development recognized that developing countries ‘should not be expected … to make contributions which are inconsistent with their trade developments’ (GATT BISD, 13S/3). The provision enabled less developed countries to use ‘special measures to promote their trade and development’ by permitting them to use quantitative trade restrictions to protect foreign exchange reserves and to use trade restrictions to protect infant industries. Contracting parties were committed to help developing countries increase their export earnings by reducing trade barriers in important sectors. They agreed to refrain from intensifying or imposing new barriers on the trade of developing countries except where ‘compelling reasons made it impossible’ (GATT BISD, 13S/2–4). The dichotomy between the developed country trading Self and the developing country Other in the trading regime reached its apogee in

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the 1968 Generalized System of Preferences (GSP) (Tussie, 1987, p. 26). This amendment, in conflict with the MFN principle, enabled developed countries to give preferential access to markets for developing countries in most industrial products and a number of agricultural and primary products (GATT BISD, 18S/73). Developing countries were also able to give preferential market access to each other. GATT documents repeatedly noted developed countries’ resolve not to expect full reciprocity from developing countries in order to help those countries nurture indigenous production. The Tokyo Round Enabling Clause (1979) finally enshrined the principle of preferential treatment for developing countries (UNCTAD, 1983, 27). Yet although the G77 movement had secured commitments for special treatment from developed countries, these commitments had little effect. The regime’s functional norms of power politics meant that the principles of differential and more favorable treatment of developing countries proved difficult to translate into firm commitments (UNCTAD, 1983, p. 27). Although the embedded liberal regime permitted derogations for social purposes, the regime’s individualistic culture defined outsiders in terms of their inability to reciprocate market access. Developed countries increasingly discriminated against developing country exports throughout the 1970s (cf. UNCTAD, 1987, p. 131). Within the normative framework of power politics, unilaterally negotiated exemptions, such as VERs, counterbalanced the commitments made by powerful developed countries to offer special trade treatment to developing countries. The GSP agreement was not enforceable and the US, particularly, was reluctant to implement this system, delaying it until 1975 (UNCTAD, 1994, p. 138). Even then, it was applied in a limited fashion. While the GSP agreement allowed free entry for developing countries’ nonagricultural products exports, it excluded product groups particularly important to many of these countries, such as steel, textiles and clothing and shoes. By 1986, the preference system had provided few benefits for most developing countries (Nicolaides, 1985, p. 385). In tough times particularly, developed countries did not see the need to meet their commitments to developing countries. From 1961, major developing country textile exporters were bound by (increasingly stringent) quantitative restrictions under the short- and long-term arrangements on cotton textiles and the MFA (UNCTAD, 1983, p. 28). These schemes excluded some developing countries entirely from preferential access. Developing countries agreed to other similar schemes – often under the threat of punitive unilateral action – to protect senescent industries, such as steel, in major industrialized

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nations (GATT BISD, 25S/20). At the same time, antidumping duties increasingly restricted developing country exports as did the GATT exemption for price support in agricultural products, and covert uses of stringent health and safety standards by developed countries (GATT BISD, 18S/76–87). In addition, GATT documents record increasing demands for developing countries to bind their tariffs. Developed countries argued that if developing countries wished to participate more actively in trade negotiations, they should be prepared to table their contributions, consistent with their development, financial and trade needs (GATT BISD, 19S/24). Developed countries argued that while they ‘did not expect full reciprocity from developing countries, it should be possible for these countries … to make contributions towards the objectives of the negotiations through appropriate action in the tariff and non-tariff field’ (GATT BISD, 19S/24). This could involve simplifying import formalities. Therefore, while developing countries’ demands for exemptions were consistent with the embedded liberal GATT norms of economic nationalism, these demands relegated them to the edges of GATT law. In relying on ‘soft law’ or ‘best endeavour’ commitments from developed countries in the GATT system, developing countries exacerbated their vulnerability to the whims of developed countries (GATT BISD, 18S/70–73). This compounded the fact that their trade with developed countries was insignificant to the latter. In a system predicated on the ability to offer concessions, the developing countries’ strategy of remaining effectively outside the system of trading rules was disempowering. As Sidney Weintraub argued with respect to the evolution of NTBs: There is a sort of Faustian bargain into which the NICs have entered with the industrial countries. The NICs have pressed for special and differential treatment, which they have received, although not in the sense of being bound in the GATT for specific products. The preferences can be removed at the discretion of the preference-giver. At the same time, many of the most competitive products of the NICs are precisely those being subjected to selective restriction … Is there an implicit connection between the selective liberalization (tariff preferences) granted to the NICs for their marginally competitive exports? … It does suggest that the bargain entered to by the NICs may be special and differential in ways they never contemplated (Weintraub, 1984, p. 32). As suppliants, not only were developing countries unable to secure the desired NIEO, they were unable to ensure that the nominal concessions were met.7

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On the eve of the Uruguay Round developing countries: felt betrayed by a trading system in which larger developed countries seemed to be allowed to take actions against them with impunity … Developed countries had not lived up to their promises to help them develop through trade and they believed themselves to be too small to exercise much leverage to make developed countries change their position (Ford Foundation Report, 1989, p. 28). So while the GATT regime was ostensibly based on multilateralism, it reflected individualistic, egoistic behavior premised on a socio-economic philosophy of embedded liberal nation-building. Developing countries’ identity as the protectionist Other within this regime and the prevailing functional norms of power politics limited the scope of its multilateralism. As senior GATT official John Croome observed, primary-producing countries had taken only a marginal part in GATT tariff negotiations up to the Uruguay Round and their own tariffs remained high and unbound (Croome, 1995, p. 39). So developing countries’ behavior, their rhetorical position in the multilateral trading regime, and the ideas that underpinned their position, established their identity as the protectionist Other. Most were convinced that they were better off with high tariff protection and consequently the GATT culture remained a limited and rivalrous multilateral regime.

Fragmenting identities Higher income developing countries became increasingly reliant on trade during the 1970s, only to have the rug ripped from under them in the early 1980s as developed country protectionism increased. Growth in trade was distributed unevenly among developing countries between 1970 and 1985, concentrated on the higher income developing countries in Asia who became increasingly important to developed country markets (Sampson, 1989, p. 173). In 1970, developing countries exported 7 percent of world exports of manufactures, producing predominantly primary products. By the beginning of the Uruguay Round in 1986, the share had risen to 12.5 percent and by 1992, 20 percent (Overseas Development Institute, 1995, p. 1; WTO Focus, No. 24, p. 8). While total developing country exports to developed countries declined from 1980 to the mid-1980s, their exports of manufactured goods to developed countries increased from 10 percent to 14.5 percent between 1979 and 1984 (Sampson, 1989, p. 175).

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A well-respected study of international trade factors by economist Edward Leamer (1984) suggested that changing comparative advantage accounted for the growing importance of developing countries in world trade. A huge redirection of trade in labor-intensive manufactures occurred between 1958 and 1975, possibly reflecting the role of multinational corporations, which split research and production activities geographically (Winters, 1989, p. 41). Newly industrializing countries and poorer industrial countries took over production of these goods from developed countries such as the US and Germany. Leamer’s 1987 modified Heckscher–Ohlin model of factor endowments showed that while countries may have similar ratios of capital per person, they might have dissimilar capital per hectare of land. This precipitated different patterns of trade and different methods of production of similar goods and hence, could explain diverse paths of industrial development. In this model, capital accumulation by some countries changed comparative advantage throughout the world. Within this framework, for example, rising wage rates in Northeast Asian countries specializing in labor-intensive production prompted the substitution of capital for labor. This capital accumulation in these countries augmented the world’s capital stock and shifted the distribution of average capital endowment in the world, changing the comparative advantages of countries. Rising wage-rates in Northeast Asian countries shifted labor-intensive industries to less developed countries in Southeast Asia and China (Anderson and Garnaut, 1987). Intra-regional trade complementarity between faster growing, resource-poor industrializing countries and more slowly growing resource-rich countries increased significantly. Rising incomes in rapidly growing countries also stimulated demand for new and different products. The postwar growth of per capita incomes increased the demand for variety and scope for product differentiation, precipitating intra-industry trade. Intra-industry trade, that is, trade between countries manufacturing different parts of a final product, reduced competitive pressure generally associated with trade between low-cost developing countries and developed countries.8 Most of this kind of trade occurred between developed countries as intra-industry trade tended to be greater at higher levels of income and between countries with small income differences. Yet as the higher income, developing countries matured industrially, they tended to engage in intra-industry trade with the developed market economy countries. Consequently in certain industries, firms in developed countries became dependent on intermediate goods and

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components manufactured or assembled in developing countries (UNCTAD T&D, 1988, p. 82). Imports from developing countries increasingly penetrated developed country markets in the 1980s, and particularly the US market. This led Japanese companies to relocate part of their production destined for the US market to some developing country sites, particularly to South East Asia and Mexico (UNCTAD T&D, 1988, p. 85). Some developing countries had achieved remarkable export success in technology-intensive products where the markets were characterized by high product differentiation and specialization, and high demand elasticity. Exports also grew, albeit more slowly, in traditional labor-intensive sectors under offshore assembling and subcontracting arrangements with developed countries (UNCTAD T&D, 1988, p. 82). Other developing countries were drawn into the trading regime through the debt crisis of the early 1980s (OECD, 1992, p. 46). This was precipitated by the privatization of lending to developing countries in the 1970s. Official development assistance (ODA) to all income groups of developing countries declined between 1971 and 1979 (UNCTAD T&D, 1985, p. 65). This was accompanied by rising bank loans for countries with higher levels of GNP per capita. The trend was due in part to the extension of IMF responsibilities and reluctance among developing countries that could raise money from private capital markets to accept IMF financing with strict conditions attached. The level of indebtedness increased during the 1970s as the international economy declined and many borrowers optimistically borrowed more (UNCTAD T&D, 1985, p 67). The external shocks that accompanied the onset of global depression in 1979 meant that many investments in developing countries financed by external borrowing, which would have been profitable in more normal business conditions, were showing losses. At the end of the 1970s, the external debt position of developing countries as a whole was regarded as unsustainable (UNCTAD T&D, 1985, p. 69). Sharp interest rate rises and the decline of commodity prices during the early 1980s, created a credit squeeze and several Latin American countries failed to meet their debt-service obligations. The credit squeeze spread to developing countries in Asia and Africa, including low-income developing countries hit hard by the decline in commodity prices.9 For all developing countries, for medium-term and long-term debt, the ratio of interest payments to export almost doubled between 1978–83, reaching almost 15 percent in 1983 (UNCTAD T&D, 1985, p. 81). The debt crisis and a 20 percent fall in developing countries’ terms of trade made the problems of securing foreign exchange more pressing

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(GATT Focus, No. 58, 1988, p. 5). While many affected countries initially reacted defensively with policies to conserve foreign exchange, they gradually adopted policies to boost trade competitiveness and to earn foreign currency (cf. UNCTAD, 1989, p. 119). IMF and World Bank policies also forced many to unilaterally liberalize their markets to increase foreign exchange earnings (UNCTAD T&D Report, 1994, p. 158). Nonetheless, countries differed significantly in their experiences. Some were able to maintain or increase their export earnings. Most, particularly low- and middle-income countries were forced to reduce imports. The effects of the debt crisis were overlaid by the collapse of the Soviet Bloc in 1989 and the end of the Cold War. This eliminated practical political economic alternatives to Western democratic model for developing countries. It also removed traditional sources of funding for developing countries that had distanced themselves from the West. Urgency surrounding the need for foreign exchange increased developing countries’ general interest in securing new markets. It prompted the recognition that the costs of trade isolation were extremely high and their fate, perhaps even more than that of developed traders, depended on a strong multilateral trading regime. Regions that experienced the largest declines in trade barriers in the 1980s, including East Asia, South Asia and Latin America also experienced the largest acceleration of exports. By contrast, growth in export volumes in Sub-Saharan Africa averaged only 2 percent per year, partly because world trade of the products Africa exports grew at half the rate of world trade (World Bank, 2001, p. 2). The poorest countries were variously limited in their ability to trade by political conflict, exchange rate volatility, weak export infrastructure and the need for tariff income on intermediate goods, which acted as a tax on trade. Many of these countries taxed agriculture, but barriers imposed by developed countries also limited their exports of agricultural goods and food products. It became increasingly clear during this period that those countries that traded least fared worst. Global recession and growing pressures for protection in developed countries intensified the sense of urgency surrounding multilateral trade issues in the early 1980s (UNCTAD VII, 1987, p. 130). As NTBs increasingly affected developing countries, they began to reassess the value of multilateral disciplines. America’s domestic antipathy towards trade competition underlined the need for a stronger multilateral system (UNCTAD, 1990, p. 87). Developing countries changed their minds about themselves being adversely affected by liberal trade and they reassessed their interests in the Uruguay Round negotiations.

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While developing countries and developed countries came to understand in the 1960s that the interests of the former were opposed to those of a market trading regime, changing trade patterns during the 1970s contributed to a growing sense of interdependence. A pervasive understanding of ‘globalization’ during the 1980s enhanced this sense of interdependence. In an objective or material sense, developing countries, as a group, became increasingly important in world trade during the 1970s. Developing countries and developed countries were increasingly affected by each other’s trading policies in material way or in an objective sense. More importantly, though, they came to recognize this and to interpret their trading interests differently. A World Bank study found that, even considering only a subset of trade barriers including quantitative restrictions, voluntary export restraints, decreed prices, seasonal tariffs and ‘monitoring measures’, over a quarter of industrial countries’ total imports were shown to be subject to at least one barrier in 1983 (Nogues et al., 1986) (see Table 4.2). By 1984, 43.3 percent of food items were subject to NTBs10 and 27.5 percent were subject to quantitative restrictions. Critically, for developing

Table 4.2 NTBs on industrial countries’ imports of manufacturesa Product

Textiles Footwear Iron and steel Electrical machinery Vehicles Rest of manufacturing All manufacturing Agriculture Fuels All products a

Imports from industrial countries (%)

Imports from developing countries (%)

Frequencyb

Coveragec

Frequency

Coverage

20.1 11.5 18.7 4.3

23.3 3.5 34.3 11.8

55.8 10.3 14.6 6.1

57.2 17.3 31.4 6.1

7.2 2.9

31.4 9.8

6.6 3.6

5.0 11.0

6.7 31.9 20.5 8.8

14.5 40.5 59.5 21.0

17.4 25.6 29.5 18.6

21.3 31.2 51.9 34.3

EEC (10), Australia, Austria, Finland, Japan, Norway, Switzerland, US, quantitative restrictions, voluntary export restraints, decreed prices, pseudo-tariffs, monitoring measures. b Percentage of trade flows (defined by exporter and tariff-line) subject to an NTB. c Percentage of imports in affected categories. Source: Nogues et al., 1986.

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countries, NTBs covered more than two-thirds of clothing imports, most of which were quantitative restrictions, and one-third of textile imports (Sampson, 1989, p. 176).

Jostling for power Developing countries, as a group, cut their average tariff rate by half during the 1980s and 1990s, from 32 percent in the first half of the 1980s to 15.6 percent in the second half of the 1990s. The degree of tariff dispersion also declined. Though this trend is easier to detect from the vantage point of the early twenty-first century, its beginnings were evident in the mid-1980s. Tariff reductions occurred throughout South Asia, Latin America and East Asia and Africa. These reductions were greatest in South Asia although tariffs remain the highest of any region (World Bank, 2001, p. 3). Tariff reductions in Africa and the Middle East were more limited. While Kenyan tariffs fell from 41 percent in 1980–85 to 13.5 percent in 1996–99 for example, Zimbabwe increased average tariffs from 10 percent in 1980–85 to 22.7 percent in 1996–99, converting an import surcharge into tariffs. Nonetheless, the trend was generalized in both low-income and middle-income countries, with the average tariff rate for low-income countries falling from around 45 percent in the early 1980s to 20 percent in the late 1990s. Certainly as the World Development Indicators show, average tariffs in developing countries remain higher than those in developed countries (see Table 4.3). Developing countries in all regions reduced NTB coverage such as licensing, prohibitions, quotas and administered pricing, and generally Table 4.3 World development indicators – average tariffs (%) 1986–90

1991–95

1996–98

Developed countries EU US Japan

9 6 7

8 6 6

7 6 6

Developing regions South Asia Sub-Saharan Africa Latin America East Asia

62 25 24 20

41 24 12 19

31 18 13 14

Source: World Development Indicators and WTO, 2000.

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moved towards market-based foreign exchange regimes (World Bank, 2001, p. 3). The effect of this liberalization on average incomes varied across countries. Those not in conflict or transition experienced an acceleration in incomes and exports in the 1990s. Some of the poorest developing countries lost market share in traditional exports and failed to replace these with new markets. Nonetheless, these issues do not detract from the fact that this change in developing country behavior changed the way they were perceived in multilateral trading negotiations and the way they viewed themselves with respect to developed country traders. Changes in trading patterns, which diversified trade relations, helped to undermine developing countries’ established alliances, such as the G77. Consequently, the Uruguay Round was characterized by new negotiating alliances between developed and developing countries. Alliances, such as the Cairns Group of agricultural exporters and the Hotel de la Paix group, were important in bringing together unlikely allies to influence the development of negotiations (Ricupero, 1998, pp. 18–19).11 The Cairns Group, linking Australia, Canada and New Zealand with Latin American countries and Asian countries to pressure for agricultural liberalization, was particularly important in setting the negotiating agenda. As developed and developing countries were becoming increasingly interdependent, a feeling that developing countries’ fate was tied to that of the multilateral trading system emerged. Although many developing countries were opposed to proposals put to them at the start of the Uruguay Round, these fears were outweighed by concerns that they would be worse off under a trading system dominated by regionalism. Developing countries particularly feared that, in the absence of agreed rules, the largest countries such as the US, would take coercive unilateral measures to achieve their national purposes (Croome, 1995, p. 290). UNCTAD noted that developing countries had been particularly affected by the protectionist trend in developed countries. It concluded that: ‘the first challenge [was] to halt the erosion of the system from within and restore credibility to the trading system’, particularly MFN treatment, momentum for liberalization and the credibility of the system’s rules (UNCTAD VII, 1987, p. 152). Generally countries became more interdependent and increasingly experienced common economic and institutional challenges associated with globalization in the 1980s and 1990s. However the effect of these changes on the culture of the trading regime depended on subjective recognition of them. As developed and developing countries gradually came to recognize their growing interdependence, common fate and the

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need for self-restraint in trade policies, they began to represent each other in partnership terms. A new epistemic community of economists and bureaucrats was particularly important in creating an understanding protectionism and exemptions in the trading regime had important costs for both developed and developing countries. This became a zeitgeist. The epistemic community influenced policy in both developed and developing countries as existing nationally focused economic policies were perceived to fail in the 1970s. Consequently, a sense emerged of fighting a common enemy: protectionism. The epistemic community highlighted the need for mutual restraint and growing interdependence in trade management. This sentiment also indirectly led to these countries adopting apparently similar market-oriented policy frameworks. This ideational change was influenced by material power as traditional theoretical analyses suggest. Power relations influence the distribution of knowledge in a population of states.12 States with substantial material resources are more likely to have extensive networks for the dissemination of particular norms. Investigations sponsored by the OECD, the US National Bureau for Economic Research and the World Bank converged around neo-classical economic prescriptions for development in the 1980s (Ewing, 1984, p. 191). Furthermore, World Bank prescriptions and IMF conditionality associated with debt restructuring in developing countries during the 1980s influenced the direction of policy change (Ford Foundation Report, 1989, pp. 3–5, 16). IMF structural adjustment programs prescribed unilateral trade liberalization and insisted that recipients of funding eliminate quotas and reduce tariffs (UNCTAD VII, 1987, p. 141). Changing political economy within developing countries played an important part in the change of character in the multilateral trading system. Although a detailed discussion of these changes in developing countries is another project, it should be noted that pressure for liberalization from international financial institutions coincided with growing pressure for change within developing countries. As levels of protection for nationally favored industries became increasingly difficult to sustain, the power of the import competing political groups declined (cf. Tornell and Esquivel, 1997, pp. 25–57). New development theories proliferated, supported by the experiences of liberalizing countries. Gradually, liberalization programs achieved greater legitimacy in governing bodies within developing countries (Bhagwati, 1998, p. 35). This helped to sustain the pro-trade practices that caused developed countries and developing countries to reassess their understanding of the latter’s trading identity.

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International studies helped to raise awareness about international economic change and the growing importance of developing countries in trade. Studies played an important part in increasing subjective awareness among traders of a common fate in the trading system, as well as interdependence. These highlighted the transformation in international trading practices. UNCTAD and World Bank studies emphasized the costs for developing countries of increasing protectionism in the developed world.13 As Table 4.4 shows, non-tariff barriers hit developing country exports particularly hard. The World Bank study covered sixteen industrial country markets: nine European Economic Community Countries (Belgium-Luxembourg, Denmark, France, West Germany, Greece, Ireland, Italy, Netherlands, UK), Australia, Austria, Finland, Japan, Norway, Switzerland and the US. These markets accounted for about 60 percent of total world imports and about 70 percent of imports from developing countries in 1981. Industrial countries’ NTBs particularly affected agricultural products, textiles, mineral fuels, iron and steel (Nogues et al., 1986, p. 17). The study showed that (in 1981 value terms) developing country imports worth US$86 billion were affected by NTBs while these barriers affected US$79 billion worth of industrial country imports. Major developing country borrowers were particularly affected. This study also found that for the sixteen industrial country markets, the number of NTBs increased by 2486 (net) between 1981 and 1983. This increase reflected new measures. In relative terms, developing countries’ manufactured goods were more affected than agricultural goods. However, because developing countries relied more heavily on agricultural exports, these barriers hurt more. Therefore, concern about protectionism and the need for stronger rules intensified among developing countries prior to and during the Uruguay Round.14

Table 4.4 Industrial countries’ NTBs on imports from industrial and developing countries Developing countries Coverage ratio Own imports World imports Frequency ratio

Industrial exporters

All

Major exporters

Major borrowers

21 17.1 8.8

34.3 27 18.6

26.5 24.6 18.1

35.4 29.4 19.4

Source: Nogues et al., World Bank, 1986, p. 25.

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The GATT Leutwiler report noted that, in the face of increasing NTB protection against their key exports, developing countries should use reciprocal concessions as an insurance policy (GATT, Leutwiler Report, 1987). The report argued that fundamental economic changes were not only inevitable but to be welcomed as a motor for economic growth and development (Croome, 1995, p. 19). The report highlighted the growing homogeneity of developed and developing country traders. Developing countries were encouraged to see themselves as part of a continuum with the more advanced countries rather than inherently disadvantaged. As the weakest members of the GATT system, the GATT secretariat noted that developing countries had the most to gain from strengthening multilateral discipline (Schott and Mazza, 1986, p. 273). So, gradually, the notion that development strategies were inherently opposed to the interests of industrialized countries was replaced by a common view of appropriate economic strategies. Whereas a series of studies had generated a common view in the 1960s that developed and developing countries had opposing interests, a new epistemic community proposed that trade was clearly in developing countries’ interests (Bhagwati, 1997, p. 261). Developing countries were enveloped in the new discourse of market economics that emerged following the crisis of confidence in Keynesianism in the 1970s. In both developed and developing countries, for various reasons, economic thought shifted from the welfare state and state-led industrialization models that had prevailed during the 1960s. In developed countries, this discursive shift was manifest as a transition from Keynesian economics to neo-classical economics following the policy failures of the 1970s and the collapse of the fixed exchange rate system (Biersteker, 1995, p. 183). In this context, an international community of government personnel, international agencies, private firms, academics, lawyers, industry specialists and journalists, generated consensus over market policy prescriptions. Neo-classical economics became ‘canonised via a centripetal process [through which] a heterogeneous and heterodox range of voices [became] integrated into a unified discursive field’ (Brown, 1996, p. 69). This found a political form in the New Right regimes of Thatcher in the UK and Reagan in the US. In developing countries, this transition emerged in the shift from ISI policies to export oriented industrialization policies. Whereas development theorists had advocated protected, state-led industrialization during the 1960s and 1970s, a new influential body of research pointed to the role of liberalization and market-orientation in developing countries (Biersteker, 1995, p. 182). High growth rates in the East Asian newly

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industrializing economies during the 1980s were attributed to marketbased policies. By the 1980s, the promise of import substitution industrialization had not been realized. Comparative studies suggested that East Asian countries that had provided incentives to export for industries with positive externalities or ‘spillover benefits’ to achieve international competitiveness had done better than those who had backed the infant industry protection horse (Krueger, 1985).15 Many began to note the costs to development associated with such a policy, which included pushing up input costs to production and final goods, as well as reducing choice. Increasingly, policy-makers accepted that tariff protection entailed welfare loss in countries that were too small to affect world prices for their exports (Caves et al., 1993, p. 167).16 Import substitution also channeled resources into industries that required comparatively more resources than overseas industries required to produce the same product. Few of these protected industries could be weaned from protection, as few domestic markets were large enough to provide sufficient economies of scale to produce internationally competitive industries. Trade protection was demonstrated to be a ‘second-best’ device to implement social policy objectives, in comparison with less price distorting measures such as taxes and subsidies17 (Corden, 1957). Development experts noted that whereas East Asian countries had been among the poorest in Asia in the 1960s, they had achieved living standards second only to Japan in Asia by 1990 (Krueger, 1995, p. 2515). Moreover, these countries had sustained growth while other countries floundered in the wake of the oil shocks. Trade bureaucrats noted that between 1960 and 1973, the largest export increases had been experienced in countries such as South Korea, Singapore and Taiwan, which had apparently adopted export-oriented policies.18 By contrast, countries such as India that had persisted in nation-building protectionist policies experienced declining export shares in manufactured goods. This evidence was regarded as a strong endorsement of liberalization (Dornbusch, 1992, p. 121). Critiques of controlled pricing and associated resource allocation inefficiencies challenged the view that development must be endogenously driven in the Third World (Rajapatirana et al., 1997, pp. 314, 322). The dominant policy literature found that those developing countries that had opened their economies industrialized more successfully than those that relied on state industry and planning (Krueger, 1981, 1983; Corbo and Ossa, 1985). These studies demonstrated that ISI policies and state planning impeded long-term development and caused structural economic problems (Ewing, 1984, p. 1993).

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In this climate, reformism culminated in UNCTAD in 1992 and a new economic philosophy based on market prescriptions emerged in its documents. UNCTAD’s role began to shift from being a ‘negotiating forum’ to being a ‘consensus-shaper’. In adopting a new speaking position for developing countries in the international sphere, UNCTAD helped to re-form the developing country identity, which had been one of ‘trade opponent’. It helped to provide a new representation of developing countries in trade matters, eroding their traditional identity as Other in the multilateral trading regime. UNCTAD VIII ‘virtually abandoned its traditional claim to provide a serious counterweight to the economic policy prescriptions of established international economic organizations’. UNCTAD VIII and UNCTAD IX emphasized the economic opportunities offered by liberalization and the latter confirmed that each country was responsible for its development (Diekmann, 1996, p. 223). Developing countries’ socio-economic policies therefore became more homogenous with those of developed countries during the 1980s as they adopted market-oriented economic policies domestically (Croome, 1995, p. 289). This occurred for multiple reasons at the domestic level. UNCTAD reports observed internal pressures for liberalization in developing countries, precipitating unilateral liberalization and a greater commitment to the multilateral trading regime (cf. UNCTAD T&D, 1989, p. 120). Some developing countries, influenced by the new wave of development economics, conducted their own studies about the benefits of trade and their antipathy to GATT negotiations declined (Croome, 1995, p. 289). This influence was particularly notable with respect to negotiations on services. The Colombian ambassador, Filip Jaramillo, who chaired the negotiations on liberalizing trade in services, claimed that those countries that had studied the problem internally were more likely to discuss the issue multilaterally (Drake and Nicolaidis, 1992, p. 66). UNCTAD VII observed that ‘the lesson for all countries [in the 1980s] has been that unless domestic policies are adequately related to international discipline, serious risks to economic stability and performance will inevitably emerge’ (UNCTAD VII, 1987, p. 142). A large number of cross-country empirical studies documented a strong relationship between trade and growth (World Bank, 2001). Developing countries that were limited in their ability to trade due to conflict or political shocks, poor infrastructure, the slow growth of world trade in their traditional export baskets or excessive reliance on tariff revenues and price controls, experienced slower growth in the 1990s (World Bank,

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2001). Greater reliance on trade helped to erode the regime’s embedded liberal normative framework, built on national economies and Fordist production methods.

Conclusions So while material factors influenced the changing role of developing countries in the trading regime, epistemic communities were also important in changing the ideas which conditioned traders’ behavior. These communities highlighted the objective changes in homogeneity, interdependence, common fate and the need for self-restraint in trade. By adopting new behaviors and roles, developing countries eroded the culture of limited multilateralism. A new economic discourse emerged around disembedded liberalism. Regimes, such as the GATT, which embodied the traditions of the social welfare state, became incongruous with an international system characterized by increasingly multinational capital and market-based economic policies. New theories of economic development and management also created new ways of exercising power in the trading realm. Socio-economic change altered the parameters for successful negotiation. Claims for international income redistribution and preferential treatment for developing countries became increasingly difficult within this discursive framework. The new norms of disembedded liberalism provided constraint and opportunity for developing countries to redefine themselves in multilateral trade negotiations.

5 Pro-trade Policies: Creating Collective Identity

For multiple reasons, developing countries came to change their trading behavior during the Uruguay Round and new behavior changed the way developed and developing countries saw their roles in the multilateral trading regime. This behavioral change and the understandings it created had profound effects on the character of the multilateral trading regime, effectively changing its culture. In adopting disembedded liberal policies, supporting a stronger rulesbased trading regime and by actively participating in the trading negotiations, developing countries changed the regime’s normative tiers. By behaving as if they had a new role as traders, developing countries eroded their previous identities. This also had the effect of eroding the traditional role adopted by developed countries in trade negotiations. By behaving differently for a variety of reasons, developing countries and developed countries learnt to see themselves in a new role and a new relationship. Thus, this in contradistinction to the understandings offered by traditional analyses, developing countries played an important role in changing the culture of the trading regime. Neorealism and neo-Marxism suggest that developing countries adopted new trade policies because these countries were coerced to do so by powerful states. Neoliberalism, on the other hand, suggests that such a change merely reflects new incentives. A social theory approach to understanding the process through which identities are formed suggests that developing states had considerably more agency in trade negotiations than is traditionally countenanced. While developing countries might have adopted pro-trade policies for instrumental reasons, in sustaining them over time, developing countries established a new trading identity. Consequently they reassessed their interests in trade negotiations. As adaptive agents, developing countries played a much more active role in 116

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constructing their interests and trading identities than traditional theories allow. Even if states adopt cooperative or pro-social policies for selfish or instrumental reasons initially or if they were coerced to make the change, these cooperative policies will erode egoistic or oppositional identities over time if they are sustained (Wendt, 1999, p. 342). As developing countries changed their negotiating stance in GATT and adopted a new role in negotiations, advocating liberalization rather than opposing it, they undermined their former identity as the egoistic Other. In engaging with multilateral trade rules, adopting disembedded liberal policies and unilaterally liberalizing, developing countries began to represent themselves in a new role. Whereas developing countries’ previously egoistic, protectionist policies and demands for exemptions from trade rules had established a group identity in the trading regime as ‘protectionist’, these new policies established a collective identity as ‘multilateral trader’. In employing the norms of disembedded liberalism and legalism during the Uruguay Round, many developing countries established a new identity through repeated interactions in which they adopted a pro-trade stance. As this new identity pervaded the population of states or began to characterize interactions in the system of states, it changed the culture of the trading regime. This change in policy cannot be wholly reduced to the imitation of successful actors, which would imply that developing countries merely tried to be admitted to a collective identity that already existed (Wendt, 1999, p. 341). Developed countries’ actions in the GATT regime were as rivalrous as those of developing countries had been, given the regime’s prevailing norms of embedded liberalism and power politics. The collective identity that was centerd on disembedded liberal norms did not exist in the trading regime prior to the Uruguay Round. Rather, the processes of complex social learning were important in constituting developing countries’ new identities and a ‘super-’ rather than ‘multi-’lateral culture in the WTO regime. It was only as developing countries adopted new representational practices in favor of trade that they (and developed countries) began to reassess their assessment of Self and Other. As developing countries established new identities as reciprocal traders in increasing numbers in the population of traders, a new collective identity was formed. Developed and developing country traders redefined the boundaries of Self and Other to establish a shared identity as multilateral traders. The Uruguay Round witnessed a role reversal between developed and developing countries. Indeed, UNCTAD and the Ford Foundation Report on the role of developing countries in the global trading system, found

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developing country involvement was particularly important given that the US leadership role was fragmenting (UNCTAD, 1991, p. 171). Developing countries, as a negotiating bloc, opposed moves by the US and Japan in the early 1980s to launch a new, expanded round of trade negotiations. Notwithstanding its own growing predilection for protectionism in particular issue areas, the US, supported by the OECD countries, advocated a new round to reinvigorate the global economy. Economists and policy experts in the OECD countries argued that the cycle of shallow integration caused by reducing border measures such as tariffs and quotas had been exhausted. A new era of deep integration was starting, extending to intellectual property, banking and investment standards (Ricupero, 1998, pp. 12–13). In an environment of global recession, the US pushed to incorporate new growth sectors such as trade in services, investment measures and protection for intellectual property rights (GATT BISD, 28S). This was important if the regime were to remain relevant to areas of growth in the new world economy. The US argued that a new round would be impossible if services and agriculture were not included. While the US had instituted the GATT waiver for agriculture, it signaled it was keen to liberalize this sector despite trenchant opposition from the EC. Developing countries initially lined up behind India and Brazil in the Group of 24 to oppose a new round and particularly, the introduction of new issues (GATT BISD, 28S/71,74).1 Consequently, the 1982 GATT Ministerial Meeting was fraught with division. As Croome observed: Acute differences of view divided developed from developing countries, to an extent not experienced in the GATT before or since, and a legacy of mutual mistrust was left that was not fully dissipated for several years (Croome, 1995, p. 14). Developing countries argued that the GATT agenda should not be extended while developed countries had failed to meet their existing commitments (Ricupero, 1998, p. 13). They were particularly concerned that backlog issues such as agriculture, textiles and NTBs should be dealt with first (GATT BISD, 32S/35). They were also wary of the new round, not having resolved their dissatisfaction over the Tokyo Round negotiations (Ford Foundation Report, 1989, p. 103). Furthermore, developing countries claimed that the GATT was not an appropriate forum in which to discuss trade in services, investment or intellectual property (GATT DOC. No. PREP.COM 86W/44/Add.1). While the Ministerial Meeting finally agreed, in a spirit of crisis, to start exploratory work on a new round, divisions between developing

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countries and developed countries over these new issues continued (GATT BISD, 29S/9). True to their traditional understanding of themselves as structurally disadvantaged in trade, developing countries such as India and Brazil claimed that liberalization in the areas of services, intellectual property and investment would merely serve the interests of, predominantly American, TNCs (Schott and Mazza, 1986, pp. 259, 262). They noted that services generally constituted around 70 percent of GDP in high-income countries and 55 percent in low-income countries (Goode, 1996, p. 83). In pre-negotiations for a new round of trade negotiations groups of developing countries argued that services were particularly important to development but they feared that liberalization might lead to a surge in imports, damaging infant industries. This would also exacerbate developing countries’ current account deficits and condemn them to being permanent importers of services. Developing countries claimed that their service industries needed a period of deregulation prior to liberalization and that developing countries must be allowed to control market access unencumbered by retaliation from developed countries (GATT DOC. MTN.GNS/W/87, May 1989, p. 156). Many developing countries also argued that restrictions on investment measures impinged on national sovereignty. They claimed that they particularly needed to retain the right to regulate foreign direct investment as a means of sheltering indigenous enterprises from TNC competition and protecting national liquidity. Developing countries argued against strengthening intellectual property rights in foreign territories, fearing that this would reduce their access to technology (cf. GATT BISD, 34S/70). They suggested that developed country attempts to protect intellectual property rights represented an attempt to secure monopolistic rents for multinational corporations (Zutshi, 1998, p. 43). Yet the evolving sense of interdependence articulated in multilateral interactions, and the growing recognition that developing countries’ economic fate was intertwined with the multilateral trading regime, prompted a new approach to negotiations. New trading patterns meant that developing countries began to recognize the need for multilateral action in sectors that concerned them. Consequently, they reduced their opposition to the Uruguay Round and the ‘Third World’ identity fragmented during the negotiations. Interdependence and a sense of common fate in particular sectors precipitated new policy alliances between developed and developing countries which were crucial in setting the Uruguay Round agenda. Many developing countries had become disillusioned with the results of

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their long campaign for special and differential treatment. They felt that any unreliable gains they had won through preferential tariffs were outweighed by their effective exclusion from influence in multilateral negotiations (Croome, 1995, p. 9). Recognition that developing country economies were being hit hard by global recession and protectionism created a new environment in which the costs of trade isolation were extremely high (UNCTAD, 1989, p. 119). Therefore, many developing countries began to consider that a trading regime that applied market disciplines broadly to both developed and developing countries would be more beneficial than a regime that permitted derogations for all. In accepting a rules-based system, developing countries helped to transform the first normative tier of the trading regime from embedded liberalism to disembedded liberalism. The stalemate between hard-line developing country opponents and the US, and the US and the European Community over agriculture provided the conditions for minor players in GATT negotiations to play a more important role (Ford Foundation Report, 1989, p. 105). This helped to undermine the predominance of power politics. Or, to put it another way, it altered the regime’s procedural normative tier of power politics and changed its culture from limited multilateralism to superlateralism. Many developing countries signaled that they were prepared to make what they perceived to be substantial sacrifices in liberalizing services and intellectual property in order to secure a stronger multilateral regime. In this, developing countries redefined their interests cooperatively to be those of the group of multilateral traders. Extensive negotiations following the Ministerial Meeting and the GATT-sponsored Leutwiler Report highlighted the costs of trade isolation, particularly for developing countries. Gradually, developing countries such as the Association of Southeast Asian Nations (ASEAN), South Korea and Chile welcomed the prospect of a new round and made it clear that they would not oppose the inclusion of negotiations on trade in services (Croome, 1995, pp. 23, 25). The G24 that had opposed the new round diminished to ten members as increasing numbers of developing countries began to reassess their interests in multilateralism (Ford Foundation Report, 1989, p. 27). Even Brazil, a leader of Third World trade opposition, joined with the Cairns Group to push for more open agriculture markets. Some influential alliances during the Uruguay Round partially excluded the traditional power brokers, the US, the European Community and Japan (Ford Foundation Report, 1989, pp. 87–8). For example, the Cairns Group’s strong demands for liberalization in agriculture were important in establishing the disembedded liberal or neo-classical

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economic agenda during the Uruguay Round. This group emphasized the need to eschew the waivers, such as that for agriculture, which had been integral to the embedded liberal compromise. The Cairns Group acted as ‘an agricultural conscience’ throughout the round and a barrier against the temptation to give in to the Europeans over agricultural subsidies (Ricupero, 1998, p. 19). The conflict between the European Community and the US over agricultural subsidies provided greater impetus for the US to negotiate with developing countries, such as Zaire, Uruguay and Colombia. So, during the Uruguay Round, it was the weight of numbers and not trading might that was necessary for negotiations to progress (Ford Foundation Report, 1989, p. 40). This suggested a new distribution of influence, not countenanced by traditional theoretical interpretations. Furthermore, a small group of developing countries was widely credited with saving the Uruguay Round from a fraudulent success that would have sacrificed agricultural and textile trade liberalization (Ricupero, 1998, p. 21). Six Latin American developing country members of the Cairns Group refused to accept partial results at the Montreal Mid-Term Review in 1988, refusing to accept an agreement that excluded agriculture.2 Many expected that the Ministers would agree to accept the disagreement between the European Community and the US in agriculture and disagreement over intellectual property rights. The developing country group, which included Brazil, a former leader of the G77 opposition to the GATT regime, argued that the negotiations had not gone far enough. Rubens Ricupero, former chairman of the GATT Contracting Parties and coordinator of the Informal Group of Developing Countries in the GATT, argued that: In the face of the European Community’s refusal to accept minimal satisfactory results in the agricultural negotiations, the dilemma was clear: to accept anything, concealing the failure, or to have the courage to refuse the consensus in order to make progress in other areas, which was equivalent to a real veto – a frequently mentioned but never used taboo instrument in the GATT rounds (Ricupero, 1998, p. 21). In a symbolic move, this group of former GATT opponents chose to walk away from negotiations rather than accept inadequate liberalization (cf. TNC/7 (MIN) December 9, 1988 in Reyna, 1993, p. 2268). While the press claimed that the Americans were behind this move or that they were informed or involved, Ricupero argued that US Trade Representative Clayton Yeutter had been ‘irritated and impatient’ with the Latin

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American initiative and could not have been trying to coerce developing countries to liberalize at this juncture. The deadlock was only broken with an all-night side meeting between the US, the EC, Canada, Australia, Brazil and India. The new agreement accepted the progress that had been achieved in eleven sectors, subject to resolving the remaining difficulties in agriculture, textiles, intellectual property and safeguards by the following year (Ricupero, 1998, p. 21). So whereas developing countries had played a limited role in previous negotiating rounds, they played a vital role in setting the agenda and in pressuring developed countries for substantial commitments during the Uruguay Round (Ford Foundation Report, 1989, p. 106). They were particularly strong advocates again at the Brussels meeting in 1990 at which the negotiations were to conclude. The Uruguay Round therefore represented a change in the procedural norms of power politics which had characterized previous rounds. It also represented a departure from limited multilateralism. The round was extraordinary because the negotiation plans were drafted by groups of developed and developing countries outside traditional GATT groupings. A group led by New Zealand, the European Free Trade Association (EFTA) countries, Australia and Canada joined with twenty developing countries that wanted a new round to independently ‘hammer out’ a draft ministerial declaration to launch the round. This group, which grew to around fifty countries, met outside the GATT and only involved the US, the EC and Japan in the last stages. Its work program formed the basis of the Swiss–Colombian draft that was used to set the Uruguay Round agenda (Croome, 1995, p. 29). The Uruguay Round was only able to proceed when developed countries agreed to address outstanding issues concerning developing countries, and they agreed to parallel but separate negotiations in services, as Brazil had proposed. The round’s negotiating mandate, rules and procedures were specified carefully, following concerns during the Tokyo Round that small and developing countries had been excluded from some important negotiations (Ford Foundation Report, 1989, p. 87). The 1982 Ministerial Declaration on the Uruguay Round highlighted development as an objective of the liberalization program and it stipulated that problems facing least developed countries should be given special attention (GATT BISD, 33S/124). The Ford Foundation Report commented that: The success that developing countries had in influencing the launch of the Round demonstrated both to themselves and to the developed countries that, contrary to previous opinion, they could indeed

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exercise leverage in GATT agenda-writing negotiations. While the possibilities for further effective participation were still perhaps not fully defined, developing countries were sufficiently encouraged by these results to join actively in the next phases of the negotiation (Ford Foundation Report, 1989, p. 40). Furthermore, as Ricupero noted, developing countries played a valuable role in pressing for more precise definitions and more reliable statistical data on trade in services. They also called for better differentiation between rules on intellectual property and investment measures and their possible distorting effects on international trade. He observed that: ‘the new issues negotiations eventually became a truly educative process for the negotiators, with more balanced results than those that would have been produced by passive acceptance of initial proposals’ (Ricupero, 1998, p. 16). Developing countries submitted proposals on tropical products, natural resources, safeguards, textiles, intellectual property, investment and services.3 Representatives from developing countries including Malaysia, Brazil, Korea, Uruguay and Cote d’Ivoire chaired negotiating groups ranging from tropical products to dispute settlement. Developing countries were also among those that advocated the single undertaking provision in the final Punta del Este Declaration, which helped to establish new legalistic procedural norms. The Latin American members of the Cairns Group were particularly keen to preempt measures to kill off agricultural liberalization. In order to avoid the task of amending the GATT Articles, Canada and the EC proposed that the new agreements should be incorporated in a totally new institution. Developing countries realized that they would have no means of defending themselves against unilateral trade measures if they remained outside the new institution (Ricupero, 1998, pp. 16, 17). While developing countries had opposed a new round, major trading powers were mainly responsible for the delay in concluding the Uruguay Round. The negotiations finally hinged on bridging disagreements between the US and the EC over agricultural subsidies while developing countries were among those that urged them to settle (Croome, 1995, p. 368). Certainly, many developing countries were skeptical of the benefits the round would bring them – and justifiably so as it turns out, given developed countries’ tardiness in implementing their commitments (Hamilton and Whalley, 1995, p. 40). Nonetheless developing countries were important in establishing the disembedded liberal agenda (GATT BISD, 33S/28). The final compromises were framed by broader multilateralism.

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The impact of the Cairns Group was underpinned by the fact that the US had supported agricultural liberalization as the cost of maintaining subsidies was rising. America’s historical commitment to liberalization and market mechanisms helped to instill an expectation of mutual selfrestraint among developing countries. Perhaps the accord between the developing countries’ agenda and America’s historical commitment to liberalization led to greater aspirations in the Uruguay Round for multilateralism than in previous rounds. The round’s negotiating principles highlighted the need for all participants to be considered in decisions and the need to achieve balanced concessions within broad trading areas (Ford Foundation Report, 1989, pp. 87–8). In this way, the change in negotiating stances during the Uruguay Round affected the character of the multilateral trading regime. By adopting a new negotiating stance, developing countries eroded their identity as the protectionist Other and they established a more powerful identity as multilateral trader. They played an active role in transforming the regime’s normative tiers from embedded to disembedded liberalism, power politics to legalism and limited multilateralism to superlateralism. Representational practices or new behaviors (whatever the initial motivation) changed negotiating identities in the Uruguay Round.

Tier one: paradigm shift Many developing countries signaled their commitment to disembedded liberalism and multilateral trade by liberalizing unilaterally during the Uruguay Round. The paradigm shift in the 1980s, from welfare statism and development economics, helped to make developing and developed countries more homogenous. This prompted developing countries to adopt policies that portrayed them as multilateral traders. Sure, many adopted disembedded liberal policies for instrumental reasons, including fiscal and balance of payments pressures and the desire to ‘catch-up’ with the NICs. Yet, in any case, these policies provided them with negotiating leverage. These policies also caused them to reassess their interests over time. Unilateral liberalization became a sign that developing countries were committed to the objectives of market discipline rather than protection. While industrial powers, such as the US and the EC, resorted to policies to protect their mature industries from developing country competition, the latter liberalized (Martin and Winters, 1996, p. 1). Developing countries therefore used their unilateral liberalization during the 1980s to pressure developed countries for reciprocity.

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Throughout the round, UNCTAD emphasized that more than thirty developing countries had been undergoing unilateral trade liberalization programs and many were in the process of genuine trade policy ‘revolutions’. For several developing countries the average MFN tariff reduction on industrial products was comparable or greater than that of OECD countries (UNCTAD, 1994, p. 147). By the end of the round and into the 1990s, developing countries had cut the average tariff rate by half, narrowed tariff dispersion and reduced the incidence of NTBs (World Bank, 2001, p. 1). A growing number had adopted policies to integrate their economies more closely into international markets. These changes had often been accompanied by moves to give market forces a greater scope, privatization of state enterprises, liberalization of foreign direct investment regulations, and liberalization of financial markets (UNCTAD, 1992, p. 55). The Ford Foundation Report found that in all of the eleven developing countries represented in its project, there were clear and unmistakable signs of movement towards unilateral liberalization. These liberalizations ranged from the ‘dramatic (Mexico, Nigeria, Korea), to the significant (Costa Rica, Kenya, Tanzania, China, the Philippines), to the small, but discernible, with potentially major re-evaluations of policy underway (Argentina, Brazil and India)’ (Ford Foundation Report, 1989, p. 37). Many countries in Africa (many not included in the report) that had followed an ISI strategy after independence also began to liberalize (Oyejide, 1990, p. 430).4 While some African countries feared the loss of preferential arrangements and higher prices, most considered that such costs would be counterbalanced by concessions from developed countries with multilateral liberalization (Rom, 1994, p. 5). The WTO reported that a ‘sea-change that had taken place in trade policies, through greater market orientation, including radical exchange, trade and domestic reforms by many developing and transitional countries’ (WTO Annual Report, 1998, p. 23). Indeed, UNCTAD claimed that developing countries had increasingly tried to integrate themselves into the world economy and had ‘become the standard-bearers for trade liberalization’ (UNCTAD, 1992, p. 43). This suggests a reassessment of the developing country identity as Other in the trading regime. During the Uruguay Round, developing countries began to represent themselves as the core of the multilateral trading Self. They appealed for reciprocal liberalization from developed countries. By the middle of the round, developing countries needed some form of reciprocity to maintain domestic political support for liberalization (GATT Focus, No. 54, 1988, p. 8). This claim by UNCTAD indicates the common sentiment

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among developing countries for tangible benefits from developed countries: In recent years developing countries have been in the vanguard of [liberalizing] change. It is now time for developed countries to respond positively and demonstrate their political will to meet the challenges of change (UNCTAD, 1991, p. 173). GATT acknowledged this role change. A review prepared by the Secretariat noted that ‘developing countries had demonstrated their growing interest in seeking fuller integration in the world economy and in the multilateral trading system through the adoption of far-reaching economic and trade reforms aimed at more market-oriented liberal trade regimes, new accessions to GATT, the increased interest in the activities carried out under the MTN Codes and continued commitment’ (GATT BISD, 39S/16). In supporting disembedded liberalism, formerly advocated by the Western economic community, developing countries were able to adopt a new negotiating strategy. They argued that developed countries, not the developing, were impeding progress in trade liberalization (GATT BISD, 30S/87). The Moroccan King Hassan II explained: The reason why many developing countries have courageously restructured their economies in order to integrate themselves better into the international economy is that they are convinced of the virtues of financial discipline and the need to cushion the [ensuing] transitional social cost. In turn, this called for a counterpart from the developed countries in the form of corresponding adjustments favouring market access and transparent conditions of fair competition (WTO Focus, No. 107, 1994, p. 4). Although they did not have established identities as multilateral traders, developing countries represented themselves as such through their actions during the round. They also established this identity by adopting the discourse of multilateral trade advocates. While they continued to disagree with many of the positions advanced by developed countries, the thrust of their opposition changed to reflect support for disembedded liberalism and legalistic rules. New and sustained interactions over trade in which developing countries supported trade liberalization eroded their traditional identity as outsiders. These new behaviors began to form new identities as developing countries and developed countries began to see the former in a different light.

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An examination of GATT and UNCTAD documents reveals intensifying concern about protectionism in developed countries and the need for stronger rules to prevent this.5 During the Uruguay Round, developing countries became vocal about the ‘palpable lack of respect’ for GATT rules among developed countries highlighting the use of nontariff measures in sectors in which developing countries generally had a comparative advantage (UNCTAD, 1985, p. 8). Developing countries actively opposed the exemptions and the embedded liberal norms that underpinned them. They particularly opposed the use of VERs to protect developed countries’ aging textile industries, the trend towards bilateralism and the mantra of ‘unfair trade practices’ as justification for such practices.6 Exemptions from GATT such as the MFA were intended to smooth shifts in comparative advantage with temporary protection for aging industries. However, developing countries claimed these exemptions merely enabled developed countries to avoid restructuring.7 They argued that developed countries had been tardy in removing quantitative restrictions where it suited their egoistic purposes and they demanded that agriculture should be liberalized before developed countries made any further claims.8 Consequently, developed countries increasingly emphasized effective compliance to GATT rules during the Uruguay Round (UNCTAD, 1992, p. 53). An UNCTAD Trade and Development report noted that: The thrust of the developing countries’ initiative shifted in that, while seeking to preserve the commitments made in their favour, they began to concentrate on defending the integrity of the unconditional MFN clause, obtaining MFN tariff reductions and strengthening the disciplines of GATT (UNCTAD T&D, 1994, p. 158). Even Indian officials, who were the most vocal opponents of the multilateral trading regime, spoke of developing a new strategic framework within the multilateral trading regime to help it shape the trends of globalization and competition (Siddiqui, 1994, p. 14). In a move that had great resonance for the role of developing countries in the trading regime, developing countries refused to negotiate over new areas while developed countries failed to deliver in areas that particularly affected them (Patnaik, 1997, p. 136). They highlighted the need to liberalize trade in tropical products, to eliminate quantitative restrictions and NTBs and curtail the use of antidumping and countervailing duties (GATT BISD, 27S/55). Rather than seeking substantive exemptions, developing countries reinterpreted ‘special and differential treatment’ to focus on graduated integration into liberalization

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commitments and technical assistance (UNCTAD T&D, 1994, p. 158). Most developing countries weighed into the latter part of the round in favor of trade liberalization (GATT Focus, 1990, p. 6; OECD, 1992, p. 19). UNCTAD VIII urged ‘the acceptance by all parties of tighter disciplines over their resort to trade policy measures on a mutual and equitable basis, taking into account the importance of flexibility as well as levels of development’ (UNCTAD, 1992, p. 53). Thus, developing countries signaled a commitment to mutual self-restraint. In identifying with the trading Self, developing countries gained new resources in trade negotiations. While they had initially opposed liberalization in services and investment on traditional development grounds, developing countries used disembedded liberal norms to challenge the inclusion of intellectual property provisions. They argued that developed countries were attempting to create a restrictive trading regime in intellectual property to protect their own firms’ monopoly profits in this sector (Zutshi, 1998, p. 43). While developed countries aimed to liberalize trade in services, this did not extend to areas that might benefit developing countries, such as trade in labor services. In some areas, developing countries advocated more radical liberalization than had developed countries, pushing the boundaries of developed countries’ commitment to liberalization. Developing countries complained that developed countries sought cross-border movement only of skilled workers, seeking to exclude the type of labor in which LDCs had a comparative advantage. A group of developing countries proposed that immigration regulations should not be an unnecessary barrier to trade in services (GATT DOC. No. MTN.GNS/W/106, June 18, 1990). Countries such as India and Brazil called for the relaxation of immigration restrictions and access to distribution channels and information networks in developed countries. Whereas pressure for special treatment had reduced developing countries’ bargaining power, supporting disembedded liberalism provided new leverage in trade negotiations (OECD, 1992, p. 11). This commitment to liberalization proved more effective than the GSP in earning concessions from developed countries in negotiations. For example, African commitments helped to secure recognition from the international community of the problems that they would confront (UNCTAD, 1994, p. 161).

Tier two: black letter law Just as developing countries moved to support disembedded liberalism during the Uruguay Round, they began to advocate a stronger rules-based

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system to replace the power politics and exemptions of the GATT (UNCTAD, 1991, p. 171). This was based on ‘black letter law’ or written law, rather than diplomatic custom. In this quest, developing countries became important in changing the regime’s functional norms from overt power politics to legalism (UNCTAD, 1994, p. 158). This stance also indicated developing countries’ commitment to mutual self-restraint. While this, in and of itself, was not enough to create a collective identity, it was an important step towards it. Developing countries’ support for mutual self-restraint through stronger rules reflected their growing awareness that their fate was tied to the multilateral trading regime. They aimed to ensure that unilateral policies such as United States’ Section 301 did not ‘receive multilateral legitimization through the Uruguay Round and also that the ability of the United States to invoke these provisions [was] circumscribed rather than enhanced’ (UNCTAD, 1992, p. 52; GATT BISD, 33S/119). Developing countries recognized that the embedded liberal GATT regime, which had provided exemptions from its disciplines to accommodate welfarestate objectives had enabled developed countries to discriminate against them (cf. GATT BISD, 27S/176, 177; 40S/532). They therefore suggested that: The acceptance of stronger disciplines would lead to a legal structure for the implementation of the results of the Uruguay Round, which would preclude the resort to unilateral trade action outside the framework of the GATT and the possibilities of cross-sectoral retaliation between trade in goods and measures relating to services and intellectual property protection (UNCTAD, 1992, p. 54). Given the deep conflicts between the US and the EU over agricultural support and the precarious state of multilateral trade, developing country pressure to reduce ‘grey area’ trade measures was particularly important in strengthening the trading regime. With this pressure, negotiators made substantial progress in dealing with NTBs – particularly VERs, which were prohibited and were to be phased out (GATT BISD, 29S/70).9 Continuous pressure from developing countries helped to ensure agriculture and textiles were brought under the auspices of the multilateral trading regime. The WTO agreement stipulated that the MFA must be progressively eliminated, although much of the liberalization was to occur at the end of a long phase-in (Martin and Winters, 1996, p. 9). Developing countries also pressured to limit the use of antidumping and countervailing measures among developed countries, although many continued to justify their own use of subsidies on development grounds (GATT BISD, 30S/76). Thus, developing countries commitment to stronger

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rules to enforce market disciplines helped to reconstruct the international trading sphere as a more juridical realm – transcending the tradition of political negotiation among trading powers (Rom, 1994, p. 21). While developing countries initially opposed Canada’s proposal for a multilateral trading regime unless it were a UN institution, some ultimately hailed the formation of the WTO as one of the Uruguay Round’s greatest achievements (Datt, 1994, p. 89). The proposal to form a legal body was accepted, despite US opposition at the eleventh hour, reflecting the more consultative, multilateral style of the Uruguay Round (Weaver, 1993, p. 1949). Developing countries also supported the bid to strengthen dispute settlement proceedings, although they emphasized the need for special consideration. They pressed for an opportunity for third parties to initiate procedures, expert panels, and a secretariat with authority to initiate studies and greater publicity concerning compliance (Stiles, 1996, p. 128). Countries such as Brazil favored strong reinforcement of conciliation procedures, recommending that developed countries that failed to comply with panel rulings should be precluded from further access to the dispute settlement mechanism (C/M/158, September 21, 1982 in Stewart, 1993, p. 2710). While the final rules did not go this far, the new emphasis on rules rather than negotiation was particularly important for smaller members of the trading regime. The new dispute settlement system significantly altered the procedures of interaction in the trading regime, providing less opportunity for large powers to act unilaterally. The system was intended to provide a mechanism for small traders to pressure larger trading partners to correct violations of multilateral agreements. Thus, ‘in essence the WTO dispute settlement system can be characterized as a compulsory and binding system’ (Bhandari, 1998, p. 155). Under the new rules, protagonists would no longer be given the option to adopt dispute panel findings voluntarily. These decisions were enforceable with financial penalties such as sanctions (Kuruvila, 1997, p. 175). Whereas parties formerly could block panel reports under the consensus rule, the new regime adopted a system of negative consensus. Dispute findings would be adopted unless members rejected the findings by consensus (Bhandari, 1998, p. 148). The dispute mechanism proscribed unilateral retaliation – an important outcome as even powerful countries concerned with maintaining the legitimacy of their own claims were pressured to adopt the regime’s more strictly specified disciplines (Jackson, 1998, p. 23). This helped to redefine power by limiting legitimate practices. In so doing, the new rules redistributed

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influence in the WTO regime to countries with fewer material means of handling disputes. Certainly, negotiators recognized that small countries would find it difficult to retaliate against a major trading nation. Small traders ultimately relied on the strengthened legitimacy of the world trading system and its moral suasion. Nonetheless developing countries seemed to regain some faith in the dispute settlement system (Srinivasan, 1996, p. 2). By 1997, developing country participation in the WTO dispute settlement system (through cases initiated by them) had increased by 28.5 percent on those initiated under the GATT (Kuruvila, 1997, p. 179). As the next chapter will explain, support for strong rules, based on market principles, was particularly significant with respect to the growing push for environmental protectionism. While developed countries increasingly sought to use trade restrictions to protect environmental and labor standards, developing countries helped to ensure the new trading regime would prevent this. Developing countries dismissed these practices as attempts to discriminate against developing countries. Instead the final WTO document argued that market liberalization would improve environmental and labor standards throughout the world (UNCTAD, 1992, p. 75).

Tier three: superlateralism As developing countries adopted pro-market liberalization policies and advocated a stronger multilateral trading system in response to changes in the system characteristics, they changed the culture of the trading system. The egoistic identities that had prevailed in the embedded liberal GATT were eroded. By representing themselves as multilateral trade advocates and unilaterally liberalizing, developing countries changed the basis of their interaction with developed countries in the trading sphere. Whatever the reasons for the change in policy, by acting as if they cared about other multilateral traders, developing countries implicitly took a collective identity: that of multilateral trader. Developed countries reciprocated, and registered a new cooperative relationship in trade (Wendt, 1999, p. 346). Although developed countries had been intensifying their egoistic behavior during the Uruguay Round by adopting protectionist policies, they ultimately agreed to accept greater restraints on their national trade policies for the collective interest. Thus, through this interaction, the boundaries of the Self were eroded for both developed and developing countries. Their identities re-formed to include each other’s trading interests. This changed the trading culture from limited multilateralism

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in which interests were defined individually to a superlateralism in which interests were defined collectively. The process of identity change was highly contingent and path dependent, brought about through domestic-level changes and systemlevel changes. Nonetheless, it reflected the complex social learning of knowledgeable agents in a way that is not countenanced by traditional materialist theories – even neoliberalism which focuses on behavioral changes and incentives. Certainly, developing countries adopted new behavior in response to changing material incentives. However, this behavior sustained over a period of time, changed developing countries’ assessments of Self. Equally, developing countries redefined their interests to include those of their developed country trading partners, even where this involved sacrifices (Wendt, 1999, p. 306). By adopting a role as multilateral trader, developing countries taught developed countries to see them differently and came to see themselves differently (although not totally differently). While developing countries chose behaviors in response to incentives and imitated successful policies as rationalist models predict, even more was going on in their interaction. These actors were also reproducing identities, narratives of who they were, which in turn constituted their interests on the basis of which they made behavioral choices (Wendt, 1999, p. 366). Consequently, the trading regime became premised on cooperation between traders.

Conclusions In contrast to the expectations of traditional theories, developing countries played an integral role in strengthening the multilateral trading regime by changing its culture from one of egoistic multilateralism to superlateralism. In emphasizing that structures and roles are culturally constituted and that ideas predominantly constitute interests and power, an analysis informed by social theory explains the role of developing countries in the processes of regime change. Such an analysis reveals that material power played less of a role in the transition from the GATT to the WTO regime than traditional theories suggest. After thirty years of attempting to change the trading regime as outsiders to the sphere, in becoming part of the multilateral trading Self, developing countries obtained greater influence in the trading regime (Hamilton and Whalley, 1995, p. 39). Paradoxically, by limiting the scope of national trade policies, the WTO regime provided developing countries with greater resources to influence trade relations.

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Developing countries adopted cooperative policies during the Uruguay Round, eroding their traditional identities as the Other in an egoistic trading regime. In adopting disembedded liberal norms, supporting legalism and unilaterally liberalizing during the Uruguay Round, developing countries adopted a new role. In sustaining this over time, they taught this identity to developed countries through representational practices. At the same time, the developing countries learned to see themselves as reciprocal traders. This helped to establish a new collective identity in the trading regime as the boundaries between developing countries and developed countries were re-formed and both groups became part of a Self of multilateral traders. This process represented a change in the regime’s culture from limited multilateralism to deeper multilateralism or superlateralism, based on a collective interest. Developing countries played an active part in changing the culture of the trading regime by adopting and sustaining pro-trade policies that prompted other states to reassess their trading relationships. This can be understood as an active process on the part of states. The learning process is the key to understanding how particular behavioral traits came to characterize the system. Rather than these traits being simply naturally ‘selected’ which implies that traits are selected with the fate of the state that carries them, these traits prevailed through the policy choices states made. States imitated successful strategies and came to understand new roles through a process of complex social learning. As Wendt explains: ‘rather than working behind the backs of actors through reproductive failure, cultural selection works directly through their capacities for cognition, rationality and intentionality’ (Wendt, 1999, p. 324). As the system of trading states came to be characterized by increasingly homogenous or common socio-economic policies, interdependence, 133

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a sense of common fate and self-restraint, many states reassessed their protectionist identities. Identities were reconstructed as former trade opponents adopted pro-trade stances in the multilateral trading regime. This implies a greater role for states lacking material power in regime change than is traditionally recognized. Even where states initially adopted pro-trade policies for instrumental reasons, this changed identities and interests as they sustained those practices over time. A new behavior that is repeated produces new rules of social interaction over time and it gradually reconstitutes actors as others come to expect different things from them. As Onuf reminds us, ‘regulation yields constitution, whether or not this effect is intended. Given the importance of unintended effects in social processes, intention is a useful but never decisive criterion for differentiating rules’ – or norms (Onuf, 1997, p. 11). Pro-trade behavioral traits were repeated or transmitted through the population of traders, characterizing the culture of the trading regime. Particular traits that characterized ‘multilateral traders’ came to prevail over other identities in the trading regime, forming part of the regime’s social fabric. Significantly, some norms advanced by powerful states did not necessarily prevail. In explaining this, it is worth observing that thinking, choosing agents can influence the reproduction structures of social behavior in the way they reinforce or challenge accepted social practices. Nonetheless, this capacity for change is bounded. It is path-dependent and contingent, often influenced by the unintended consequences of actions. Norms might be distributed across the population of states at different rates because they have different levels of usefulness. Clearly the distribution of particular behaviors is also affected by states’ domestic norms. While material factors might influence this process of reproduction, they do not determine it. This helps to explain why norms advanced by states with great material power do not always prevail in regimes over those held by states with less material power where these norms conflict (Florini, 1996, pp. 367–9).1 During the Uruguay Round, cultural change, or a change in the distribution of behavioral traits or norms in the trading regime, changed the way in which power was exercised in the regime. As countries adopted the characteristics of multilateral traders, for example, by committing themselves to disembedded liberal economic policies, these norms underpinned the legitimate discourse in trade matters. These norms not only shaped states’ behavior, they also helped to construct them as actors in trade interactions. The norms of disembedded liberalism and legalism came to prevail in the trading regime over competing norms such as radical environmentalism

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during the Uruguay Round. Whereas traditional theoretical approaches exaggerate the role of material power, this chapter argues that the process was highly contingent. While countries with material power advanced environmental norms that contradicted those which underpinned the multilateral trading regime, these countries were largely unsuccessful in getting their way. Developing countries were able to employ the norms of disembedded liberalism and legalism to prevent the use of trade measures for environmental purposes, contrary to the wishes of the US and many European countries. By establishing a new conception of Self in the trading regime, a collective identity as ‘multilateral trader’, developing countries helped to change the practices considered legitimate in the trading regime. This provided developing countries with new resources to influence outcomes and redefined power in the regime. They were able to use the new socio-economic and procedural norms to hoist developed countries on their own petard of trade liberalization, securing commitments for greater liberalization and formalized rules than many developed countries had wanted. Within the new culture of superlateralism, developing countries’ welfare became defined to include that of developed countries. Developing countries therefore secured a commitment to self-restraint from developed countries in their combined interests as multilateral traders. In this context, as partners rather than rivals or the protectionist Other, developing countries had greater influence over outcomes in the trading regime, despite their lack of material power. Thus, while environmental politics in Europe and the US emerged as a powerful threat to the liberal trading regime, challenging the concept of economic growth on which it was based, developing countries were able to deflect this threat. In opposing environmental protectionism as contrary to the collective interest of multilateral traders, and by supporting disembedded liberalism and legalism, developing countries limited the way developed countries could legitimately use environmental standards to discriminate against their exports. While the embedded liberal GATT regime might have permitted the use of trade policies to protect high national environmental and labor standards, the new WTO regime prevented this.

Competing social practices While neo-Marxism and neorealism predicted that radical challenges to the market norms of regimes would emerge in developing countries, environmentalism emerged in the major industrialized nations,

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fundamentally challenging the trading regime. Paradoxically, countries that had been most important in creating the international trading regime mounted the greatest challenge to its norms via environmentalism in the 1970s and 1980s. Environmental concerns, like labor standards, rose to prominence late in the Uruguay Round as the US Congress proved unwilling to ratify the NAFTA without agreements on environmental and labor standards. These issues also resonated in Europe where they were debated in negotiations for a social charter in the European Union in 1992 (Anderson, 1996b, p. 435). Many environmental groups in developed countries argued that trade norms, emphasizing economic growth, conflicted with environmental norms. They argued that market and trade objectives should be secondary to the goals of environmental protection and that this should be reflected in trade rules. So, when Uruguay Round negotiators agreed in February 1991 to convene a working party to examine links between trade and the environment, many environmentalists in developed countries considered it a triumph for environmental politics. It seemed that pressure exerted through NGOs, as well as via domestic politics in the US and Western Europe, had provided a real opportunity to incorporate environmental priorities in the international trading system (Shaw and Hanson, 1996, pp. 144–6). Yet developing countries argued that these new issues and their prominence late in the Uruguay Round negotiations reflected a desire to protect high-cost industries in developed countries from competition. Developed country industries competing with emerging industries in East Asia, China and other developing countries had begun to focus on the lower cost structures in these countries. They argued that low environmental standards and low wages in these countries gave their industries ‘unfair advantages’ and made it difficult for industries in countries with higher standards to compete. Therefore, many argued for discriminatory import restrictions on like products from lower-standard countries (Anderson, 1996b, p. 435). Developed countries successfully put these issues on the WTO agenda, despite concerns in many developing countries that this would legitimate discrimination against their imports. Nonetheless, the way in which environmental norms were incorporated into the new regime limited their influence. While states with material power advocated environmental protectionism, the WTO regime ensured that disembedded liberal norms that prioritized market mechanisms over regulatory measures predominated over environmental concerns. The new trading regime recognized the need for ‘sustainable development’ but this aimed to synthesize the objectives of growth and

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environmental protection. Although the embedded liberal GATT regime might have permitted derogations for environmental purposes, the way it had for other social objectives, the WTO regime effectively prevented this. The WTO regime explicitly stated that environmental standards should not be used as a form of trade discrimination. Ann Florini’s (1996) explanation of the way norms are selected in a population provides a useful, if somewhat stylized, way of thinking about the problem. In contradistinction to mainstream theories that link the transmission of norms purely to the material power of states, Florini suggests that particular norms have influence because of the way they are reproduced or transmitted across the population of actors. Norms or social rules have different frequencies in the population because some are more likely to be taken up than others; that is, they have different levels of reproductive advantage. While norms are transmitted vertically through a population of states via social learning, they are often transmitted horizontally across the population via imitation. Rapid norm change often occurs through imitation, particularly in complex situations or when dealing with incomplete information (Florini, 1996, p. 380). Three factors explain which norms or social rules are likely to be adopted or ‘selected’ over other competing rules. These are: the prominence of a rule in the pool of competing social practices; coherence or how well a norm interacts with others in the pool, and the environmental conditions in which the rules are generated (Florini, 1996, pp. 374–5). Certainly, material power is a factor as this can help in disseminating a norm, but it is not definitive. Contingency is as important. Social rules that are propagated by a ‘norm entrepreneur’ or that are associated with a prominent actor have an advantage in the population. As Florini observes, ‘the most brilliant technological innovation will not diffuse if it is created by an inventor who dies without telling anyone of his invention’. Social practices become prominent internationally either because someone is actively promoting them, or because the state where the variation in practice first arose happens to be conspicuous and others emulate it (Florini, 1996, pp. 374–5). Furthermore, the environmental conditions (of which states are part) in which norms are propagated, affect the reproduction of these norms. These conditions include the distribution of material power, the availability of resources, and technology. However, while the reproduction of particular social practices may depend on particular resources or technologies, they are only part of the explanation of fundamental behavioral change (Florini, 1996, p. 377). Norms must fit with other prevailing norms or intersubjectively held understandings. Power and legitimacy

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in particular circumstances are defined by mutually held ideas (Wendt, 1999, pp. 321, 331). A new norm becomes legitimate within the community when it is a reasonable behavioral response to the environmental conditions facing the members of the community and when it ‘fits’ coherently with other prevailing norms (Florini, 1996, p. 376). All of these factors – as well as chance – are important influences over which particular social rules become widely accepted in the population. In an important respect, the prevalence of disembedded liberal norms over environmental norms in the trading regime reflects contingency rather than disembedded liberalism providing greater benefits than environmentalism. Disembedded liberal norms might have been better able to coexist with other prevailing norms. These norms might also have had a more favorable environment, fostered by more powerful sources (including states and epistemic communities). They might also have been more prominent in the pool of competing social rules or norms. Furthermore, the way in which disembedded liberal social practices were transmitted (horizontally) across the population of states (including developing countries that had traditionally opposed market mechanisms) suggests a break in the prevailing rule-following patterns (Florini, 1996, p. 378). Rapid social change is often associated with policy ‘crisis’ that provides scope for the rapid take-up of an accessible alternative. Such change is often associated with a rapid change in intellectual or political leaders. It is also associated with the clear failure of existing social practices (to the extent that the previous way of doing things has become virtually impossible) and the emergence of a new issue area in which prevailing norms are not established. As previous chapters have argued, the transition to disembedded liberal norms and stronger market-based rules in the international trading regime was preceded by a sense of general disaffection with the prevailing embedded liberal model. Hence, states were likely to have emulated the behavioral traits of particular states, transmitting disembedded liberal norms horizontally across the population. It is also conceivable that environmental norms were transmitted in a less favorable political environment than that associated with the transmission of disembedded liberalism, for example. Environmental epistemic communities were comparatively divided over the nature of international environmental problems and trade. In contrast, economic epistemic communities increasingly agreed on the need for market or disembedded liberal policy prescriptions (Henderson, 1998). Disembedded liberal social practices were also propagated by agencies, such as the World Bank, that had an established voice on policy prescriptions. This provided these groups

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with an advantage in disseminating norms over relatively newly formed environmental agencies. As the next section will argue, the social rules of environmentalism evolved vertically and also horizontally across the population of traders, as environmental protection gained momentum as a political issue in the 1960s. However, the contradictions between environmental norms and rapidly emerging disembedded liberal norms of socio-economic organization limited the way environmentalism was incorporated into the trading regime.

Environmental challenge Environmentalism was initially presented – particularly in the 1960s and 1970s – as a radical critique of capitalism and economic growth. An epistemic community of scientists and activists disseminated environmental beliefs and practices in major industrialized countries. This fulfilled several necessary conditions for the diffusion of particular social practices. Environmental norms were transmitted by powerful ‘norm entrepreneurs’. Their spread across nations, following new scientific studies about the extent of global environmental damage, was also influenced by the fact that this was a new issue area in which protocols had not been established. However, given that these environmental beliefs and practices conflicted with prevailing legitimate social rules about the need for economic growth and market economics, their transmission was limited. Rather, as the environmental challenge to capitalist development was channeled through the prevailing rules of national and international politics, the objective of ‘greening the GATT’ was redefined into a commitment to pursue ‘sustainable development’. That is, to pursue growth that does not consume or destroy more resources than it generates. The objective was to be achieved through trade liberalization and ensuring that the goals of trade and the environment were ‘mutually supportive’ (GATT BISD, 39S/316). This reflects the conditioning influence of structures over agents’ actions as preexisting structures or social rules govern practice (Onuf, 1997, p. 9). It also suggests the problems associated with transmitting social rules that conflict with other widely and more deeply established norms. Scientific work supported by powerful states that identified previously unrecognized environmental problems was important in elevating environmental beliefs and practices in the population of states (Bolin, 1997, p. 139). Concern over environmental damage, such as ozone depletion,

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rapid and polluting industrialization in developing countries and the loss of biodiversity, generated political activism within and outside existing political structures. Pressure to modify the trading system to address environmental concerns began in transnational associations of protest movements, scientists and NGOs that emerged in the 1960s. This activism was supported by publications in the US of the controversial computer modeling works, Limits to Growth by the Club of Rome (1972) and Global 2000 Report to the President. These publications challenged the dominant economic paradigm (Porter and Welsh Brown, 1991, p. 28). Paradoxically, some of the strongest capitalist centers, the US and Western Europe, fostered the environmental critique of capitalism. These centers were thus strong ‘norm entrepreneurs’ in this area. Advanced scientific work in these centers helped to legitimate a new anti-industrial politics (Porter and Welsh Brown, 1991, p. 190). While part of the environmental political concern centerd on localized issues, such as the use of pesticides, it fed a critique of the capitalist logic of growth. Environmentalism became the sinew binding a variety of new social movements that advanced a radical critique of modern industrial civilization and society. The political alternative was to privilege ecological stasis over economic growth. This would require a new approach to the prevailing socio-economic rules. As the environmental focus shifted from local issues to transboundary concerns, environmentalism became a more potent international issue. In the 1980s, the international scientific community shifted its focus from local environmental problems to transboundary air pollution. Environmentalists also focused on climate change and other threats to the integrity of the biosphere, atmosphere, land, oceans and destruction of tropical forests (Bolin, 1997, p. 143). These new beliefs resonated most in the high-income, highly educated, democratic populations in the US and Western Europe. In contradistinction, developing countries tended to focus on biodiversity and issues concerning their more immediate economic future (Eckerberg, 1997, p. 123). At an international level, environmental groups in the West argued that world trade laws should prioritize environmental protection over trade liberalization. They argued to amend GATT to relax tariff bindings and to allow states to introduce NTBs and discriminatory trade measures without considering the economic consequences (Robertson, 1991, p. 5). They also warned against ‘uneconomic growth that impoverishes rather than enriches’ (Housman and Zaelke, 1992, p. 247). These groups feared that a growing emphasis on disembedded liberal policies and legalism |in the trading regime would undermine national autonomy to use trade measures for environmental purposes.

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Hard-line environmental activists argued against growth per se, and by implication, trade. They argued that in accelerating economic growth, trade liberalization promoted pollutive activities and depleted nonrenewable resources (Anderson, 1995, p. 22). This statement by a trade policy analyst for Friends of the Earth to a US Congressional subcommittee submission is indicative: The assumption that more trade will lead to wealth, and therefore an improved well-being for all, must no longer go unchallenged. Perhaps it is time to recognize that free trade, in its purest form, may not serve our goals of improving the quality of life for present and future generations to come. In fact, these principles may be harming our progress toward that goal (Durbin, 1994, p. 2). Many who supported the environmental agenda perceived trade-restrictive polices to be potentially useful instruments with which to secure multilateral cooperation on global environmental issues. Some environmental groups envisaged using trade measures to prevent trade in endangered species and to strengthen universal environmental standards (Anderson, 1995, p. 22). They hoped to use trade restrictions as a vehicle for protecting the world’s common stock of resources. Developed-country NGOs, such as the National Wildlife Federation, anticipated that GATT might be used to harmonize global environmental standards (Hudson, 1993, p. 36). Environmental activists focused on the potential of trade measures for political suasion. This contradicted neo-classical liberal economic trade theory which warned that trade measures were inefficient instruments for redressing environmental externalities, (Shaw and Hanson, 1996, p. 146). Environmentalists argued such measures had a place, given that abatement measures such as carbon taxes were politically unfeasible in many countries. Trade measures could be used as sweeteners to compensate domestic producers for relatively stringent domestic environmental policies. Alternatively, they could be punitive measures to coerce other countries to raise their environmental standards or to sign and abide by international environmental agreements. Environmental groups argued that GATT rules, which prevented the discriminatory use of trade measures, potentially contradicted multilateral environmental agreements (MEAs). MEAs, such as the Montreal Protocol on Substances that Deplete the Ozone Layer, promoted different trade restrictions on countries, based on their status as parties or nonparties to the Protocol. Environmentalists feared that these protocols could be

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challenged for violating the GATT’s core MFN and national treatment principles and its prohibition on quantitative restrictions (Van Putten, 1999, p. 3). Domestically, environmental groups in developed countries argued that GATT rules disadvantaged countries with high environmental standards. Strong environmental movements (particularly in the US and Western Europe) argued that pollutive industries migrated in search of low environmental standards and forced countries to reassess their environmental protection measures (Van Putten, 1999, p. 7). Indeed, GATT’s own studies initially supported this view. The GATT study on industrial pollution control and international trade (1971) found that: … polluting industries in the countries with the most exacting standards, would thus become relatively less profitable, their expansion would slow relatively to that of corresponding industries, and there would be a tendency for these industries to move out of countries with relatively heavy direct costs of pollution abatement (GATT, 1971, p. 11). Environmentalists in developed countries argued that the cost advantage derived from lower environmental standards provided an implicit subsidy for developing country producers that unfairly enhanced export competitiveness. These activists claimed that low environmental standards warranted countervailing action (Robertson, 1991, p. 16). Some argued this justified protection against implicit environmental subsidies in developing countries. Environmentalists used statistical evidence to argue that the world trade regime needed to regulate trade to protect the environment. Empirical studies in the 1990s linked stringent environmental regulations and poor trade competitiveness. This contradicted the dominant view among economists that translocation in response to environmental standards had been limited (Anderson, 1998, p. 242). Environmental groups cited studies, such as that of Andrew Chinpeng Ho and Josephine Chinying Land, assessing US environmental regulations and trade patterns (Chinpeng Ho and Chinying Land, 1997, p. 183). They found that by the 1990s there was an observable trend of relocation of the most pollutive industries to Third World countries. Other similar studies were used to show that European manufacturers had produced and marketed pesticides in the Philippines that were banned for environmental reasons in Europe. US car and furniture manufacturers also transferred

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polluting activities to Mexico to avoid abatement costs (Lang and Hines, 1993, p. 36). Japanese logging companies were significant deforestation offenders in Pacific Rim countries. Similarly, the American company Union Carbide’s lower safety standards in Bhopal, India, had caused a disastrous chemical spill that had galvanized environmental movements for higher global standards. To combat this, environmentalists increasingly sought to use existing GATT exemptions to justify their use of environmental taxes and charges for domestic environmental purposes (WTO Press/TE 002, 1995, pp. 2, 4). They controversially advocated unilateral measures, arousing accusations of ‘eco-imperialism’ from developing countries (Vogel, 2000, pp. 72–3). In this way, actors within developed countries resisted change in the regime’s normative tiers towards disembedded liberalism and legalism. Many environmentalists opposed restrictions on technical standards and NTBs being advanced in Uruguay Round negotiations. Groups such as the World Wildlife Fund, National Wildlife Federation and Friends of the Earth argued that eliminating NTBs would undermine national policies for environmental protection (Vogel, 2000, p. 73). They argued that the regime would reduce the means available to countries to protect their high environmental standards (Pearson, 1995, p. 125). Certainly, the GATT regime allowed, and its successor retained, exceptions from general obligations necessary to protect human, animal or plant life or health (GATT, Article XXb). GATT rules also allowed exceptions to conserve exhaustible natural resources if such measures were used together with restrictions on domestic production or consumption (Article XXg) (GATT BISD, 40S/99). Yet environmental groups feared that increasingly legalistic interpretations of GATT laws would limit the use of such exemptions. Equally, narrow interpretations of the national treatment principle would prevent a nation from applying tariffs or other import restrictions to protect a domestic industry that had internalized environmental costs in its production costs (Housman and Zaelke, 1998, p. 176). Environmental groups argued that a lack of transparency in dispute settlement procedures favored trade interests over environmental concerns and they pressed for the inclusion of NGOs in these processes (Canadian Foreign Policy Review, 1994, p. 5) Some environmentalists argued that GATT rules should permit governments to offset differential environmental protection costs at the border with a system of import charges and export rebates (Pearson, 1995, p. 130). They also wanted to ensure that GATT rules would enable

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governments to use subsidies to promote the rapid introduction of stringent environmental protection measures. Critics observed inconsistencies that indicated a bias against environmental protection in the trading regime. On one hand, trade rules restricted governments’ rights to subsidize environmental protection expenditure in the private sector. On the other hand, the rules prevented countries from acting against implicit environmental subsidies on imports (Pearson, 1995, p. 130). Environmental groups suggested that the rules should be changed to enable countries to limit importation of products produced in nonenvironmentally friendly ways (Housman and Zaelke, 1998, p. 177). These groups called for major changes in the social rules that underpinned the trading regime. This is epitomized by a report from a meeting in 1992 on the results of the Rio Conference that called for: [R]eplacement of GATT with an international trade organization operating on democratic and transparent lines and endeavouring to achieve fair international trade which is compatible with ecologically sustainable development (Cameron and Ward, 1994, p. 97).

Sanitizing environmentalism Although prominent states with powerful scientific and economic means helped to transmit environmental norms in the international population, this process was undermined by prevailing social practices that fundamentally conflicted with environmentalism. Traditional theories that discuss norms as a function of state power or the expression of autonomously derived interests have little to say on this. However, as environmental politics were channeled through prevailing political and social structures, the contradictions between radical environmental norms and trade norms became more complicated. As Gorel Thurdin, Deputy Speaker of the Swedish Parliament noted, institutions have evolved based on the premise that nature would continue to provide life-supporting services independently of the way humans used and controlled it. As a result, the environment is external to the system of social institutions that govern our normal way of living (Thurdin, 1997, p. 10). Given that technological change had transformed localized economies into more internationally focused entities, governments were obliged to find a compromise between international trade and environmental concerns.

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Consequently, the conflict between the competing social rules of environmental protectionism and disembedded liberalism was distilled into a form that technically enabled them to coexist in the trading regime. This process largely undermined the environmental challenge to economic growth and disembedded liberalism. Certainly, leaders of environmental movements spoke of the need for a commitment to cultural change that would facilitate a ‘Welfare Planet’ (Wuori, 1997, p. 166). Yet the environmental norms advanced by industrialized countries were not incorporated into the trading regime in the way that many environmental groups had intended. As the GATT excluded non-state actors including NGOs at this stage, state actors were the only agents directly able to put ecological rationality on the international trade agenda. International associations, particularly those that supported radical environmental policies that conflicted with market economics, tended to have less legitimacy and fewer resources than those that distilled economic norms internationally. A transnational association of environmental experts interacted with NGOs that were influential in Western social democratic countries, such as the EFTA countries and the US. National governments, such as the US, Sweden and Switzerland, influenced by popular support for ‘green policies’, argued to include environmental issues on the international trade agenda (GATT Focus, No. 77, p. 10). The prevailing political structures helped to reduce the contradiction between environmental and disembedded liberal norms. While the environmental movement had become international, having been disseminated through transnational associations since the 1960s, its primary conduits to and from the international trading regime were national democratic politics. These structures of political procedure legitimated environmental beliefs and practices. Nonetheless, they also reduced the scope for radical change. While the anti-economic growth message, with its prescription for a dramatic change in the Western lifestyle, had some popular support, it was not an easy issue to sell to a constituency that included business. Furthermore, many European and American constituents recognized the difficulty in building appropriate institutions to implement environmental agreements (Thurdin, 1997, pp. 11, 15). The antigrowth message did not sit comfortably with prevailing international social and economic practices. Therefore, the challenge to economic growth and market capitalism was ultimately diluted to ‘identify the relationship between trade measures and environmental measures in order to promote sustainable development’. Even where

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environmental pressure was strongest, in the US and in Western Europe, the sustainable development message resonated more effectively with prevailing institutional practices than had calls for environmental regulation (US Trade and Environment Committee, 1993, p. 9). In this context, curbing protectionism undertaken in the name of the environment became a primary concern (WTO Symposium on Trade and Environment, 1999, pp. 1, 5). Moderate environmentalism became mainstream in the US and in Western Europe, particularly, during the 1980s and powerful constituents put these issues on the world trade agenda. In the process, though, the problem of achieving international consensus about who should bear the costs of environmental protection complicated the transmission of environmental practices. For example, developed countries that supported environmental norms, did not recognize a need to fund cleaner technology or compensation for less intensive use of endangered resources in developing countries (Robertson, 1991, p. 23). Constituents in developed countries generally did not support redistributive measures for international environmental protection, but focused instead on the evils of ‘unfair trade’ and ‘eco-dumping’ (Anderson, 1999, p. 12). Environmental pressure in international trade tended to center on protecting national standards in advanced industrial countries (Van Putten, 1999, p. 7). This pressure intensified throughout the 1980s, as trade concerns in developed countries generally became more prominent. Concern with ‘fair trade’ was reinforced by a revival of international environmentalism before the Rio Earth Summit of 1992 (GATT Focus, No. 77, p. 6). Preempting the anti-globalization movements, such as S11, that have exploded in violence outside major economic gatherings in the late 1990s and early years of 2000, environmental movements captured the prevailing spirit of popular hostility towards ‘unfair competition’. Environmental groups in developed countries were particularly keen to ensure that their producers would not face a cost disadvantage by maintaining high environmental standards. They aimed to preserve the right to use trade and environment policies for national political reasons (Shaw and Hanson, 1996, p. 138). The pressure for environmental protectionism came to a head in the Uruguay Round with public outcry over the GATT decision against America’s tuna embargo to protect dolphins. This coincided with environmental concerns over the NAFTA negotiations that ultimately produced an associated environmental code. Critics argued that GATT panel interpretations limited the use of legitimate exemptions and prevented countries from banning imports produced in harmful ways

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(Pearson, 1994, p. 128). They also argued that GATT panels tended to interpret the provisions for exceptions too narrowly. For example, panels interpreted the standard of ‘necessary’ to protect human, animal or plant life or health stringently, which meant few exemptions were given under these provisions (Housman and Zaelke, 1998, p. 49). Thus, European states and the US particularly, pushed to address environmentalism in GATT negotiations in a bid to appease the environmental outcry from their constituencies (GATT Focus, No. 77, p. 10). Rather than a radical environmental agenda, though, the message was more akin to the embedded liberal compromise that had prevailed in the GATT. Certainly, no state explicitly argued to transform the GATT into a forum to harmonize environmental policies as the radical environmentalists advocated (GATT Focus, No. 77, p. 6). The EFTA countries claimed that they sought a ‘rule-based analytical discussion of the interrelationship between trade and the environment without any “pre-cooked” results’ (GATT Focus, No. 80, p. 9). Notwithstanding this moderation, developed countries generally wanted to ensure that GATT rules could not challenge national environmental policies. They also increasingly used health and safety standards to prevent imports (WTO Press/TE 002, May 8, 1995, p. 2). Many in the US Congress threw their political weight behind environmental groups calling for environmental reforms in GATT. They opposed GATT’s treatment of unilateral measures to enforce environmental standards and this intensified following the dispute panel’s decision against US measures to protect dolphins (Vogel, 2000, p. 76). In response, America’s GATT negotiators moved to address environmental issues in future negotiations. Equally, the European Community argued for a more global and forward-looking environmental agenda than that previously associated with the rules-based approach of the GATT (GATT Focus, No. 101, p. 10). The developed country agenda was clearly slanted towards securing environmental protection. Switzerland, representing EFTA in 1990, argued to intensify international cooperation over environmental protection measures (GATT Focus, No. 77, p. 6). The GATT Focus newsletter reported the Swiss advocate as saying: Many GATT members ha[ve] taken measures to protect the environment and international cooperation in this regard should be intensified. These environmental measures might have trade effects. Thus there [is] an urgent need for GATT members to gain a better understanding of the subject of environmental policies and GATT rules (GATT Focus, No. 77, p. 6).

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Similarly, Austria emphasized the importance of extending environmental protection in the GATT (GATT Focus, No. 77, p. 6). GATT negotiators agreed in February 1991 to convene a working party on trade and the environment.2 Despite the great hopes of environmental groups for a chance to prioritize environmental norms in the trading regime, GATT negotiators presented a more modest agenda. The GATT Group on Environmental Measures and International Trade was established to consider: multilateral environmental measures vis-a-vis GATT provisions; multilateral transparency of environmental regulations; and the trade effects of new environmental packaging and labeling requirements (GATT Focus, No. 85, p. 1).

Strange bedmates The way in which disembedded liberal social rules limited the transmission of new, competing environmental social rules was influenced by the trading culture that was emerging in the Uruguay Round. New and sustained trading behaviors created different roles and relationships, and new normative tiers. As the identity of multilateral trader and the new norms of disembedded liberalism and legalism were sustained by repeated practices, states began to reassess their notion of Self and Other. They also redefined their interests in terms of other traders. The prevailing distribution of ideas limited and simultaneously facilitated the way in which competing norms could be transmitted. As disembedded liberal norms and their associated practices helped to form a new culture of trading practice, opportunities to distribute competing environmental norms became increasingly limited. States refrained from adopting policies that contradicted the interests of the multilateral group of traders. While developed countries aimed to establish exemptions for environmental purposes in the new trading regime, many developing countries vigorously opposed ‘environmental protectionism’ (Vogel, 2000, p. 84). To some extent, developing countries continued to construct their opposition with an appeal to equity and justice, as they had while development norms prevailed during the 1960s and 1970s. They argued that developed countries had become rich by exploiting the environment and now wanted to prevent developing countries from doing the same thing. Yet they predominantly expressed their objections to environmental protectionism in terms of the objectives of the multilateral trading regime and disembedded liberalism. Having established themselves as part of the Self of multilateral traders, developing countries opposed attempts to ‘green the GATT’ as a protectionist attack

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on the socio-economic and procedural norms of the trading regime. They also suggested that such practices contradicted multilateralism. Led by India, many developing countries resisted attempts to address environment and trade frictions in the GATT negotiations. India warned that the GATT could become overextended if it tried to deal with nontrade issues such as the environment (GATT Focus, No. 78, p. 3). Developing countries feared that this could lead, as European environmentalists hoped, to environmental barriers to trade becoming legitimate (Porter and Welsh Brown, 1991, p. 141). For example, Chile stressed that the GATT’s Article XX, which covered certain environmental measures, should not become a general rule because it was itself an exception to GATT rules (GATT Focus, No. 78, p. 3). Asian and African countries, as well as India and Brazil, claimed that industrialized countries used environmental concerns as a ruse to protect their industries from export competition (Khor, 1994, Pt. III, pp. 3, 5). Many developing countries were particularly suspicious of Western motives in introducing environmental norms into the Uruguay Round agenda, especially given the EC’s intransigence in earlier negotiations over agriculture (Lal Das, 1998, p. 92). While disembedded liberal, legalistic and environmental norms disseminated by epistemic communities conditioned states’ behavior, these norms also provided a resource for negotiators. Disembedded liberalism and legalism proved to be more powerful in this respect. For one thing, disembedded liberal social practices that characterized the new trading regime had greater prominence in economic and legal bureaucracies. For another, a GATT report on Trade and the Environment provided statistical analysis to support its claims that trade could bridge the gap between development and environmental objectives. It explained that market liberalization could meet both objectives simultaneously with the right policy balance (GATT Focus, No. 88, p. 1). Economic studies showed that multinational corporations tended to use cleaner technology than local companies used in developing countries (Harrison and Eskeland in Anderson, 1998, p. 242). The GATT study noted that trade rules placed essentially no constraints on states’ ability to use appropriate policies to protect their environment. It paradoxically reaffirmed state sovereignty while the increasing prevalence of disembedded liberal policies and legalism limited the kinds of trade policies that states could legitimately adopt. As the study explained: What the rules do constrain is attempts by one or a small number of countries to influence environmental policies in other countries, not

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by persuasion and negotiation, but by unilateral reductions in access to their markets … Countries are not clones of one another and will not wish to become so – and certainly not under the threat of unilateral trade measures (GATT Focus, No. 88, p. 1). Thus, the international economic epistemic community made a market solution to environmental protection issues ‘thinkable’ and legitimate. This helped to reinforce the practices that had established a collective identity as multilateral trader in the WTO regime. Consequently, developing countries employed economic models and disembedded liberal policy prescriptions to argue that trade policies for environmental purposes were ineffective and inefficient. As developing countries became more homogenous in economic policy orientation (for a variety of reasons) during the Uruguay Round and began to treat other traders as partners rather than rivals, they were reconstituted as more powerful actors in the trading regime. In establishing a collective identity with developed countries over the use of market instruments and rules to facilitate trade liberalization, developing countries established a new legitimate claim on their trading partners. Whereas they had been constructed as outsiders by pursuing exemptions and protectionist policies in the GATT, developing countries became legitimate traders by adopting disembedded liberal practices and pro-trade policies. Having a louder voice in the new, deeper multilateral regime, they secured a commitment to self-restraint and greater trade liberalization than they had been able to achieve with protectionist policies. Developing countries argued, in common with the epistemic community of economists, that market mechanisms and rule-governed trade would benefit the environment through income growth. They used market models to argue against the use of environmental protectionism on efficiency grounds and championed ‘sustainable development’ instead (Srinivasan, 1996, p. 16). Developing countries pushed for multilateral market measures as a solution to environmental and development problems. For example, African negotiators maintained that unilateral measures, as proposed by environmental lobbies in many industrialized countries, to restrict or ban imports of tropical timber because the exporting country concerned was not pursuing sustainable forest conservation would be inconsistent with GATT principles and rules (GATT Focus, No. 82, p. 3).

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In resisting attempts to legitimate exemptions from GATT disciplines for environmental purposes, developing countries helped to underpin the shift from an embedded liberal regime to a disembedded liberal regime, which disciplined national exemptions from trade rules. They argued that environmental objectives should be compatible with an open trading regime (GATT BISD, 40S/76). In this way, the socio-economic norms of disembedded liberalism embodied in the multilateral trading regime became consistent environmental norms. The discourse of economic science, with its tropes of modeling and statistical analysis, concealed the divergent values implicit in the environmental challenge to free trade (Durbin, 1994, p. 4). Thus, while prominent norm entrepreneurs, such as the US, had helped to propagate environmental norms, just as they had disembedded liberalism and legalism in trade, the latter principles seemed to accord better with prevailing practices within states at the time.

Reflexive agency: developing countries and ‘greening the GATT’ The way that disembedded liberal rules and legalism predominated over environmental norms in the population of states influenced the way states could act in the trading regime. For example, established ideas about economic management influenced the manner in which environmental norms were incorporated into the WTO regime during the Uruguay Round. Moreover, the culture of the trading regime constructed state roles, their associated interests and power. Developing countries emulated apparently successful disembedded liberal policies following the policy fissures of the 1970s. In adopting pro-trade policies, developing countries also came to see themselves in a new role in the trading regime, as the previous chapter suggested. Even where developing countries adopted these policies through imitation or for instrumental reasons, as they sustained these practices over time, they played an active role in constructing their identities in a way that rationalist theories overlook. It is important to reiterate that prevailing norms provided resources that enabled states, as learning, knowledgeable agents, to influence policy outcomes. Developing countries used the socio-economic rules of disembedded liberalism to offset pressure for environmental protectionism. As adaptive agents, developing countries modified their approach to trade rules, favoring disembedded liberalism and legalism to minimize scope for developed countries to discriminate against their exports

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on environmental grounds. This caused developing countries to redefine their trading interests. At a meeting of developing countries in September 1994 to discuss trade directions, these countries called for a proactive strategy to counter the ‘new issues’ such as environmental and labor standards advanced by developed countries. The Third World Network proposed that developing countries should take the initiative to introduce their own relevant issues. These were to be ‘more legitimately trade-related’. The meeting resolved that developing countries needed a joint strategy to ‘intellectually counter the Northern-initiated new issues’. It also agreed to address traderelated factors ‘that distort trade and skew the trading system in favour of the North’ (Khor, 1994, Pt. III, p. 6). The Economics Division Chief of Bangladesh’s Planning Commission captured the prevailing developing country perspective on environmental protectionism in this way: The Northern countries are denying us our comparative advantage, the very basis on which trade should be based. They should allow us to have our comparative advantage and survive (in Khor, 1994, Pt. III, p. 5). Contrary to their former antimarket dissent in the trading regime, developing country arguments against environmental protectionism were based on a market-oriented approach to governance. By employing the legitimate discourse, developing countries reinforced their construction as insiders to whom reciprocal respect was due, rather than outsiders in the trading regime. Their arguments resonated with historically well-established norms in the US and Western Europe. For example, disembedded liberal solutions to environmental problems tapped into notions of individual rights. This also reaffirmed developing countries’ identity as part of the Self of liberal traders. Developing countries argued, together with economists and trade bureaucrats, that market measures were more efficient and effective means of protecting the environment than the regulations that environmentalists tended to advocate (GATT Focus, No. 82, p. 3). Developing countries used economic arguments to reject claims in the US and in Europe that lower environmental costs or standards in developing countries represented an unfair trade advantage (Srinivasan, 1996, p. 16). ASEAN negotiators claimed that environmental issues had been used as a convenient cover for protectionist motives (GATT Focus, No. 82, p. 2). Developing countries claimed that moral arguments involving environmental protection and labor standards were increasingly being used

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as trade barriers (WTO Press/TE 002, 1995, p. 4). Developing countries claimed that environmental diversity among countries was perfectly legitimate, given different abatement costs, different technology and different incomes (Srinivasan, 1998, p. 67). To this end, they employed the established economic analysis that found: Forcing the poor country to spend as much on abatement will reduce its welfare substantially. Hence the common presumption driving demands to harmonize standards or (alternatively) to countervail the ‘social dumping’ consequences of lower standards – that is, the assumption that others with different [cross-country intra-industry] standards are illegitimately and unfairly reducing their costs – is untenable (Srinivasan, 1998, p. 68). Drawing further on environmental economics, developing country negotiators argued that ‘poverty is the worst polluter in the developing world’ (GATT Focus, No. 101, p. 10). Developing countries argued that economic growth was vital for development and for environmental protection. They observed that better trade terms and greater access to markets were essential for environmental protection. As the Tanzanian delegate told the GATT negotiations on behalf of African delegations: ‘For us, developmental concerns are the most pressing environmental problem’ (GATT Focus, No. 82, p. 3). The urgent need of foreign exchange meant that many African countries had diverted agriculture from food to export production resulting in soil loss, desertification and deforestation. Meanwhile, falling commodity prices had prompted many countries to overexploit the land. African countries maintained that unilateral measures used to restrict tropical timber imports and to force forest conservation in developing countries were failing (GATT Focus, No. 82, p. 3). Developing countries argued vigorously in GATT negotiations that rising income would produce greater demand and capacity for higher environmental standards (Srinivasan, 1998, pp. 68–9). The World Bank estimated that the US had devoted more than 2.5 percent of its GNP to environmental actions from 1978 to 1980. In contradistinction, not one of a group of forty developing countries had devoted more than 0.3 percent of its GNP to the same purpose (Tobey, 1989). Furthermore, an economic study for the World Health Organization and the UN Environment Program, linked income growth with reduced pollution (GATT Focus, No. 88, p. 3). Economists noted that fast-growing economies with liberal trade policies (such as Chile) experienced less

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pollution-intensive growth than closed economies (such as Bolivia and El Salvador) (World Bank, 1993a, p. 1). Similarly, developing countries took up solutions advocated by liberal economists. They proposed positive incentives for environmental protection such as technological transfers and financial incentives (GATT Focus, No. 88, p. 1). Neo-classical economics proposed that clean technologies were best encouraged via pollution taxes and abatement credits. Trade liberalization also had an important role in this regard by reducing wastage and pollution (GATT, PC/SCTE/M/5, 1994). Therefore, these methods should be preferred over the ‘blunt instruments’ of quantitative or trade measures (Anderson, 1998, p. 238). In this way, developing countries, conditioned by the norms of the international trading regime, used these rules as resources to negotiate over environmental protectionism during the Uruguay Round. This is not to imply that the process was free of coercion or instrumental rationality, but that it was a complex learning process in which identities were at stake. Certainly the policy shift towards trade liberalization involved instrumental concerns initially. Nonetheless, in sustaining these practices over time, developing countries achieved greater influence as they began to be identified as reciprocal traders. Developing countries’ pro-trade policies counterbalanced environmental protectionism in the US and Europe, tapping into the notions of a trading Self that had existed in these countries (in a more limited form) under the old regime. Developing countries added suasion to free trade forces within the US against Congressional pressure to use subsidies and trade restraints for environmental purposes (Porter and Welsh Brown, 1991, p. 141). Whereas the GATT, with its norms of power politics and embedded liberal exemptions, had defined countries with monopolistic capabilities as the powerful, the WTO regime substantially de-legitimated this kind of power. In de-legitimating power politics and restrictions for national purposes and establishing instead, market-based prescriptions and tighter rules, the WTO regime assigned greater influence to small traders. Legitimate power in the trading regime was limited to those states that formed part of the collective identity of ‘multilateral or reciprocal trader’ by supporting disembedded liberal policies and legalism.

Superlateralism and sustainable development This redistribution of influence can be seen in the way that environmental norms were included in the WTO framework. Developing countries

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helped to ensure that the GATT working committee would deal with environmental norms within the rubric of disembedded liberal economic rules in the international trading regime. Consequently, the GATT committee convened to consider environment and trade issues concentrated on the core concerns of multilateral liberalization. They declined to legitimate trade restrictions for environmental purposes (GATT BISD, 40S/77). The committee was primarily charged with the task of ensuring that policies in the fields of trade, the environment and sustainable development were ‘compatible and mutually reinforcing’. WTO documents emphasized the prevailing concern to prevent protectionist environmental measures (GATT BISD, 39S/319). Committee delegates agreed that problems of policy coordination between environmental and trade objectives should be resolved in a way that did not undermine internationally agreed trade rules and disciplines agreed to during the Uruguay Round. The committee noted that: an open, secure and non-discriminatory trading system underwritten by the GATT rules and disciplines can facilitate environmental policy-making and environmental conservation and protection by helping to encourage more efficient resource allocation and to generate real income growth (GATT BISD, 40S/78). The committee also emphasized the need for checks and balances on the use of GATT’s exemptions under Article XX to prevent their ‘protectionist abuse, which would be as detrimental to the environmental agenda as to trade’ (GATT BISD, 40S/79). Thus, despite environmental groups’ fondest hopes, their attempts to infuse the GATT with environmental rationality were translated into concern over environmental protectionism. With conflict over environmental issues threatening to stall the Uruguay Round again, negotiators agreed to establish a permanent body in the new trading regime to continue the work. This agenda was only secured in April 1994, at the eleventh hour of negotiations, by a moderately worded approach (GATT Focus, No. 96, p. 5). This partially deflected developing countries’ fears about the use of moral arguments, such as labor or environmental standards, for trade purposes. In establishing a permanent Committee on Trade and Environment (CTE) in the WTO negotiating framework, negotiators sought to defuse some of the opposition to liberalization generated by environmental lobbyists. Finalized just as the Uruguay Round was formally concluded at Marrakesh in 1994, the CTE enabled negotiators to conclude the beleaguered round. The committee’s brief was to carry over work begun

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by the (interim) Group on Environmental Measures and International Trade (GEP) and to ensure that environmental conflicts would not undermine the multilateral trading regime. The Decision on Trade and Environment emphasized that: there should not be, nor need be, any policy contradiction between upholding and safeguarding an open, non-discriminatory and equitable multilateral trading system on the one hand, and acting for the protection of the environment, and the promotion of sustainable development on the other (GATT Focus, No. 108, p. 1). The Marrakesh Agreement on Trade and the Environment gave the new CTE a broad mandate covering all aspects of the multilateral trading system, including goods, services and intellectual property. Its functions were analytical and prescriptive. The CTE was to identify the relationship between trade measures and environmental measures to promote sustainable development and to make recommendations on whether to modify the multilateral trading system (GATT, 1994, p. 2). Modifications were to be compatible with the ‘open, equitable and non-discriminatory nature of the system’ (WTO Annual Report, 1997, p. 140). Negotiators could not agree on whether to supplement WTO law with additional rules or agreed interpretations for the protection of the environment. GATT documents observed that there had never been a legal dispute over GATT rules and trade measures contained in the 185 MEAs negotiated or over environmental measures imposed domestically. However, environmental groups pointed to controversial panel interpretations concerning production and processing methods. They argued that GATT dispute panels needed to draw on expert environmental opinion and many opposed the lack of transparency in GATT procedures. Nonetheless, the committee subscribed to the dictum that: In respect neither of its vocation nor of its competence is the GATT equipped to become involved in the tasks of reviewing national environmental priorities, setting environmental standards or developing global policies on the environment (GATT in Cameron and Ward, 1994, p. 103). GATT negotiators saw multilateral policy cooperation as the solution to pressing demands for a cleaner environment and for environmentally friendly goods. However, they warned that progress depended on environmentalists accepting the view that trade restriction was not the

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solution to trade and environmental conflicts. Negotiators advocated further modeling or even a world environment organization to work with the WTO to ‘redirect environmentalists’ attention away from the use of trade measures’ towards more efficient measures (Anderson, 1998, pp. 249, 251). Such studies would highlight the futility of radical environmental proposals to return to localized, less industrial production. It would instead explain ‘practical market solutions’ such as environmental taxes. Thus, the way in which the Uruguay Round addressed environmental issues clearly prioritized market imperatives. The GATT officials emphasized that trade liberalization, with appropriate policies to overcome environmental externalities, could solve environmental problems. This was particularly important in agriculture where subsidies were shown to be responsible for unsustainable resource use – an issue particularly pertinent for developing countries. The stated objective was to ‘dispel any misperceptions that the GATT contradicted or put in jeopardy collective efforts to address environmental problems’ (GATT Focus, 1991, p. 5). Taking its cue from the (1972) Bruntdland report, Our Common Future, the Organization adopted a technical-rational approach to sustainable development. This emphasized cost–benefit analysis and the use of market mechanisms for reducing environmental external costs. Consequently, the WTO regime synthesized environmental and trade norms by promoting free trade as the only effective instrument of environmental protection. Competition from better-established norms in the structures of international trade and within states limited the effect of environmental norms. The agreement on Trade and Environment emphasized that the WTO aimed to coordinate policies in these fields ‘without exceeding the competence of the multilateral trading system’. This competence was limited to trade policies and those trade-related aspects of environmental policies that might result in significant trade effects for members (GATT Focus, No. 108, p. 1). While environmental concern became a new social rule within the international trading regime, it did not transform the regime’s normative framework of disembedded liberalism. Given the greater involvement of developing countries in the Uruguay Round negotiations and the rise of disembedded liberalism, the WTO regime’s technico-legal framework severely limited the environmental agenda. The WTO aimed to ensure consistent trade policy throughout nations, regardless of their domestic environmental concerns. The preamble identified sustainable development as an objective, ‘seeking both to protect and preserve the environment and enhance the means for doing so’ (Agreement

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Establishing the WTO, 1994, p. 1). Although the WTO referred to sustainable development as a goal, there were no legal obligations to achieve this end in the text (Cameron and Ward, 1994, p. 100). The trading regime was reorientated to prioritize nondiscrimination, reciprocity in tariff reductions and transparency, which left limited room for members to use trade sanctions to protect exhaustible environmental resources, such as rainforests and fisheries (Lang and Hines, 1993, p. 63). Disappointed environmental activists argued during the Uruguay Round that the international trading system provided no financial incentive for developing countries to increase their environmental protection standards. The WTO framework accepted that having different environmental standards could provide an economic opportunity for developing countries. This accorded with the prevailing export-oriented development theory. This theoretical approach found that many developing countries grow by using their abundance of comparatively cheap labor to develop labor-intensive industries. Over time, capital is substituted for labor as the wage rate rises and comparative advantage shifts to new industries. Similarly, developing countries should be able to use their advantage of lower environmental standards to develop industries or be compensated for the loss of income associated with meeting international standards. Economists noted that it was unreasonable to accuse developing countries of eco-dumping by producing exports with less stringent environmental standards if those lower standards were ‘consistent with the preferences and natural resource endowments of the exporting countries’. Countries that were poorer, less densely populated or less urbanized were likely to pursue export earnings, even if these were obtained through pollutive industry (Anderson, 1998, p. 239). Rich countries did not have the right to prevent such pursuit without offering compensation. Furthermore, the eco-dumping arguments overlooked the fact that countries may be capable of achieving similar levels of environmental quality at different costs (ESCAP, 1994, p. 49). In contrast to their earlier approach opposing market mechanisms and seeking to replace market-oriented trading rules with redistributive rules, developing countries supported a technocratic approach to environmental issues. Drawing on the norms of disembedded liberalism, they supported a dispute settlement system that would limit the use of environmental protectionism. They were particularly keen to bring the proliferating eco-labeling schemes under multilateral disciplines (Raghavan, 2000, p. 8).

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Whereas developing countries’ arguments for redistribution had proven ineffective, technocratic arguments had cogency in policy circles. Equitable policy-making was ostensibly defined scientifically rather than politically. This was epitomized by the new agreements on sanitary and phytosanitary measures that aimed to ensure, that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal and plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence (WTO Article 2:2). The new measures permitted temporary precautionary restrictions (Article 5:7) but they provided for dispute settlement panels to seek scientific expert advice as to whether the trade measures were too restrictive (Petersmann, 1995, p. 37). The agreement proscribed a particular measure if there were a less-trade restrictive measure reasonably available. Similarly, the Agreement on Technical Barriers to Trade encouraged countries to use international standards as the basis of their environmental protection measures. The agreement aimed to ensure that technical regulations, voluntary standards and conformity assessment procedures should not be more trade-restrictive than necessary (Petersmann, 1995, p. 36). However the new rules stipulated that developing countries need not use international standards as a basis for their own technical regulations if such standards were not appropriate to their needs. While there was no requirement to harmonize standards, the agreement set out procedures to assess whether imported products met national regulations. National rules were not to be applied more strictly than necessary (Pearson, 1994, p. 135). Moreover, while the WTO provided greater access for NGOs in environmental questions and public access to discussion documents, the CTE approach fell short of NGO demands for substantive change. WTO rules aimed to prevent countries using their national environmental and social preferences to discriminate against developing country products. As in the case of the development challenge to liberal trade in the 1970s, the norms of disembedded liberalism prevailed over radical environmentalism. Although developed countries had apparently succeeded in elevating environmental norms in the GATT (1994), the outcome ensured the predominance of trade norms. The WTO gave a commitment to ‘sustainable development’ and refracted environmental concern through the prism of prevailing neo-classical economic norms. The new rule-based multilateral trading regime ensured that

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environmental norms were superseded by trade concerns where the two conflicted.

Conclusions In distilling the conflict between trade and environmental norms to a commitment to sustainable development, the Uruguay Round strengthened the multilateral regime against developed country protectionism. Whereas traditional theories suggest that the norms held by powerful countries will prevail in regimes, a social analysis of the ‘greening of GATT’ suggests that this process is more complicated. Environmental norms did not prevail over disembedded liberal social rules in the international trading sphere, even though powerful norm entrepreneurs advanced them. A changing distribution of ideas influenced the way in which power was defined in the trading regime. Consequently, while developing countries lacked material power, they used the norms of neo-classical economics and legalism in resisting attempts by more powerful countries to legitimate environmental protectionism. Given that developing countries had been reconstituted as part of the Self of multilateral traders, they were able to secure self-restraint from developed countries with respect to environmental protectionism, arguing that this was in the collective interest of the community of multilateral traders. Even traditionally intransigent opponents of the marketoriented trading regime, such as India, employed disembedded liberal policies and began to support legalism.

7 India Adopts a New Trading Identity

Developing countries changed their identities and their interests in the trading regime by adopting cooperative policies during the Uruguay Round. By implementing a new policy stance using disembedded liberal principals and stronger ‘black letter’ or formal law, these countries also changed the culture of the trading regime to become superlateral rather than multilateral. They created a new collective identity of multilateral trader while their egoistic identities as the protectionist Other eroded. This enabled developing countries to have more influence within this regime, although their capacity to change it was framed by the prevailing rules of social procedure. This chapter continues this theme but takes a more particular look at the way in which India, as a leading opponent of the multilateral trading regime, came to redefine its role and its relationship to other traders during the Uruguay Round. India’s role changed from protectionist to multilateral trader, helping to change the culture of the trading regime. A growing sense of homogeneity among traders with respect to their socio-economic policies, interdependence, and a sense of common fate influenced this process. Traditional theoretical approaches emphasize the material incentives for India’s new economic policies. Neorealism and world systems theories particularly suggest that American coercion prompted India to become more supportive of a multilateral trading regime. Equally, Gramscian neo-Marxism suggests that the Indian state, acting in the interests of its bourgeoisie, was ultimately bound to support the trading regime’s hegemonic order disguised as multilateral institutions (Cox, 1983). Neither does liberalism equate India’s policy change with regime change. Neoliberalism suggests India’s policy shift was a rational response to changing incentives, consistent with the prevailing trading regime. 161

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However, these theories understate the way in which India came to redefine its role and its interests in the trading regime. They underestimate the extent to which regimes and agents are intertwined. Traditional theories overlook the way that states, such as India, played an active role in sustaining an identity and the way that this can cause a change in the general understanding of role relationships over time. While India’s policy shift can be regarded in behavioral terms as responses to changing incentives, as a rationalist approach would argue, the change was deeper, reconstituting India as an actor. India’s decision to support the disembedded liberal regime helped to fragment egoistic trading identities and to form a collective trading identity (Wendt, 1999, chapter 7). Whereas the US was traditionally regarded as the hegemonic architect of the international trading regime, India was broadly conceived of as its counter-hegemonic foil in the multilateral regime. Although it was a founding member of GATT, India was the most vigorous advocate of concessions for developing countries until the latter phases of the Uruguay Round. Like the US, India established a new identity or role by adopting and sustaining new behaviors, teaching other states to understand it differently through repeated interaction. This process was one of complex social learning. While this was influenced by a change in the degree of socioeconomic homogeneity among traders, as well as their sense of interdependence, sense of common fate and self-restraint, the change was refracted through India’s evolving domestic political structures. Traditional theories regard this role-change as a response to a change in incentives or as a response to a threat by powerful traders. Yet although material events were important, the meanings attached to these events were more important. The new ideas that underpinned India’s new stance were most significant. Whereas India had resisted pressure to liberalize previously, it revised its understanding about its identity and its interests during the Uruguay Round. India substantially liberalized its trading regime and agreed to be bound by GATT disciplines. It actively supported a stronger multilateral regime (Government of India, 1998).1 Although some of the motivation for this policy change was instrumental, driven by the need for foreign exchange, the change nonetheless helped to reconstitute India as an actor in the multilateral trading regime. This, in turn, helped to change the culture of the regime. In adopting a new policy stance with respect to trade liberalization, India, like other developing states, helped to construct a new culture

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within the international trading regime. Although Indian trade policy literature is limited, Jagadish Patnaik’s study of India and the GATT found that India, with other developing countries, played an important role in the transition from embedded liberalism and deepening multilateralism (Patnaik, 1997, p. 7).2 Disembedded liberalism, or ‘forced liberalism’ in Patnaik’s terminology, accepts that international institutions have a degree of legitimate coercive power for enforcing rules and norms. This power did not exist under the embedded liberal compromise. Patnaik claims: Although forced liberalism [disembedded liberalism] is not an exclusive Third World contribution, it is the direct consequence of the increased activism of the developing countries in rule-making and rule-application in the international system: it is an outgrowth of the democratization process in the international system through multilateralism (Patnaik, 1997, p. 7). Clearly, India’s transition from protectionist Other to multilateral trader was not a sufficient condition for cultural change in the trading regime. Cultural change implies a generalized change in ideas and identities. Yet the transition was particularly significant, given India’s traditional role as one of the leading opponents of the multilateral trading regime.

India: non-alignment, leadership and protectionism In accepting disembedded liberal social rules and law over informal rules in the multilateral trading system, India signaled a radical departure from its traditional role. India had historically led the charge for wealth redistribution in an NIEO and India had eschewed liberal market strategies domestically since independence in 1947 (World Bank, 1996, p. 3). In the post-WWII GATT regime, in which powerful countries established national social priorities over the collective trading interest, India also pursued egoistic policies. It focused on developing national industries under a system of state-led capitalism and import substitution (Dasgupta, 1995, p. 67). Under the Mahalanobis model of economic development, India’s first development priority was to become self-sufficient in the production of capital goods (Desai, 1989, p. 41). India’s role in international trade was constructed within the normative frameworks of postcolonial development theory and embedded liberalism. Developing countries drew on the embedded liberal norms of economic nationalism to secure exemptions from GATT disciplines. India’s

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industrial strategy, which aimed to develop national industries behind protectionist walls, accorded with the prevailing international theories about development and the role of government (Lewis, 1995, p. 9). In adopting ISPs and seeking to become relatively independent of Western economic power, India established an identity within the international sphere as the Other to the Self of traders. It maintained high tariff barriers, drawing on GATT waivers for balance of payments purposes and infant industry provisions (GATT BISD, 3S/63). India also adopted a role as the leader of the ‘non-aligned movement’ in the international sphere. It demanded wealth redistribution and the creation of a New International Economic Order. In the international trading regime, it argued for special and differential treatment rather than reciprocity (Patnaik, 1997, p. 97). Despite its relative industrial strength, India adopted an egoistic identity as a protectionist demanding concessions from developed countries. India also cast developed countries as the exploitative Other. Yet the concessions developing countries secured from developed countries were only to be implemented ‘where feasible and appropriate’ (GATT BISD, 20S/19). This trading relationship was established as both developing and developed countries learned their respective roles through repeated interaction. Developing countries and developed countries adjusted to the representations of Self and Other conveyed in each other’s actions. In this way, each state’s ideas about who it was and what it wanted came to reflect the appraisals of the Other. These respective identities were reinforced over time and the relationship became a relatively stable social structure (Wendt, 1999, p. 334). At another level of analysis, India’s national identity was also constructed in terms of its desire for independence of the international economic system. The corporate body of the Indian state was partially defined through its quest for self-reliance following its independence from Britain in 1947 (Lewis, 1995, p. 9). The state drew on the internationally shared norms of embedded liberalism with its prescriptions for interventionist government. The strategy was also contingent on prevailing domestic factors, such as the bureaucracy, which was the legacy of British colonialism. India’s founding republican politicians were preeminent, providing the state with a political legitimacy that prevailed until virtually the 1980s (Lewis, 1995, p. 8). Postcolonial Indian governments understood the country as having been victimized by colonial injustice and believed that the economy required growth that could not be achieved via

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market economic measures (Lewis, 1995, pp. 9–10). Buoyed by postcolonial nationalism, the Indian State sought to establish a national identity as a self-made industrial power, although this was compromised by the nation’s strong alliance with the Soviet Union during the 1970s. Indian national economists looked to 1880s’ research, comparing the underdeveloped condition of colonial India with other countries such as the rapidly industrializing Meiji Japan (Mayer, 1992, p. 30). India therefore sought to control and regulate the impact of the international environment on its domestic economic and political choices (Rudolph and Rudolph, 1987, p. 11). It opted for Soviet-style state planning and ISI, producing a hybrid economy that combined massive public investment and a major role for the private sector (Bhagwati, 1998, pp. 23–34). In this way, India transformed itself from a predominantly agricultural economy in 1947, to become a major industrial economy by the 1960s. The nation became largely self-sufficient in most areas of manufacturing including heavy primary production, defence, motor vehicles and consumer durables (Mayer, 1992, pp. 26, 33). Until the 1990s, about 93 percent of India’s local production of internationally tradeable goods was protected by some type of quantitative restriction on imports.3 India maintained quantitative protection of 94 percent on agricultural goods and 90 percent for manufactured goods. The government granted import licenses only where there was no source of indigenous supply and licenses were not granted to commodity traders for resale. All bulk items such as cereals and petroleum were ‘canalised’, imported only by a government monopsony ( Joshi and Little, 1996, p. 63). India also had a restrictive tariff structure with maximum tariff rates as high as 400 percent in 1991 and a simple average rate of 125 percent (World Bank, 1995). These policies isolated the country from the rest of the world such that its share of world trade declined to less than half a percent during the late 1980s, down from 2 percent in the 1950s (World Bank, 1996, p. xvii). Despite periodic pressure from the US and international organizations such as the IMF to become more integrated into the international economy, India established a certain independence of the international sphere. America’s attempts to pressure India with bilateral aid to adopt particular policies during the 1960s were disastrous. While India occasionally agreed to reforms, liberalizing measures were implemented tentatively until the 1990s (Lewis, 1995, pp. 154–5). Indeed, India was prepared to forgo growth to avoid the humiliation of dealing with US aid agencies.

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India attempted to use its position to alter the international economic order in favor of developing countries (Doyle, 1983, p. 430). India’s first Prime Minister Jawaharlal Nehru was also instrumental in founding and defining the non-alignment movement during the Cold War (Dantwala, 1969, p. 12). In seeking non-alignment to either the US or the Soviet Union in the early Cold War years, India aimed to obtain international development support without the strings of dependency (Patnaik, 1997, pp. 47–8). To this end, the nation played a leading role in constructing multilateral aid institutions such as the International Development Association to reduce the political impediments of foreign aid. Domestically, the non-alignment strategy strengthened support for the centrist approach to government and it bolstered support for Congress party leaders such as Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi (Rudolph and Rudolph, 1987, p. 3). However, this nonalignment became an alliance with the USSR in the 1970s, cementing India’s role as the Other in the multilateral trading regime. India sought to provide a philosophical alternative to alignment with the West for other developing nations. Through coalitions such as the G77 developing nations, India continuously articulated a vision for a new international order based on redistribution (McDowell, 1994, p. 499). It also helped to establish the principle of nonreciprocity for developing countries in trade negotiations (GATT BISD, 1S/69). Despite being a founding member of the GATT, India argued in trade negotiations during the 1950s and 1960s that the regime was failing developing countries by excluding many of the products they traded (Patnaik, 1997, p. 86). India argued that tariffs were particularly important to developing countries as a source of income and as a means of protecting industries in the course of development (GATT BISD, 1S/69). At the thirteenth Session of GATT in 1957, a committee formed to study measures to expand developing countries’ trade found that ‘the predicament of the underdeveloped countries was due in no small measures to the trade policies of the developed countries’ (in Patnaik, 1997, p. 88). Indian policy-makers strongly supported the UNCTAD movement of the 1960s and 1970s to redress the ‘trade gap’ (GATT COM, III/95, BISD, 11S/204). Consequently, the GATT Secretariat established a permanent Committee on Trade and Development (CTD) (GATT BISD, 11S/75). India and the United Arab Emirates sought to amend the GATT to provide preferential treatment for developing countries (Patnaik, 1997, p. 90). India helped to win trade concessions from developed countries for manufactured products and the right to protect infant industries and to use subsidies for development purposes (Bhandari, 1998, p. 67).

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By establishing that developing country and developed country interests were naturally divergent, India also helped to underscore the egoistic, embedded liberal philosophy of the GATT trading regime. Furthermore, by repeatedly appealing for concessions and opposing the norm of reciprocity, India reinforced developed countries’ dominance in the trading regime. This helped to perpetuate the normative framework of power politics. By adopting the role of suppliant, rather than reciprocal trader, India helped to cast countries, such as the US, in the role of power broker. An unexpected side effect of this strategy was to help legitimate America’s unilateral trade measures against ‘unfair’ traders. Moreover, in remaining largely outside GATT disciplines, India and the other developing countries ensured that the regime would remain limited in scope.

India and the Uruguay Round: squaring up True to form as the protectionist Other, India lined up in opposition to a new round of trade negotiations in the early 1980s. For the first half of the round, India was conceived of as a ‘pirate’ making sporadic forays designed to throw the negotiations into disarray (Patnaik, 1997, p. 117). It particularly opposed including new issues on the negotiating agenda. When the US aimed to include the liberalization of services as a priority issue at the 1982 GATT Ministerial Meeting, India was among the most vocal of its opponents. India with Brazil led the G10 ‘hard-liners’ opposed to the round and its extension to new issues (Winham, 1989, p. 286).4 Developing countries were opposed to the extension while developed countries continued to ignore issues of importance to developing countries (GATT DOC L/5818, June 7, 1985/2). India objected to developed countries using NTBs, countervailing duties against subsidies and antidumping duties to protect their industries from developing country imports (GATT, L/7567). India, like other developing countries, argued for progress in trade of agriculture, tropical products and textiles. These countries demanded that developed countries must liberalize in these areas before any round could begin (Winham, 1989, p. 286). To this end, developing countries, led by India and Brazil, attempted to stall negotiations (Oxley, 1990, p. 133). India’s traditional dependency theory perspective and its embedded liberal traditions of prioritizing national welfare objectives framed its response to the question of including services in trade negotiations. India and Brazil vehemently opposed efforts to include trade in services on the GATT agenda. This would provide developed countries with an

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even greater advantage over developing economies (Stahl, 1994, p. 430). Services were becoming more important in the world economy and industrialized countries were likely to dominate trade in services, they argued. Their position was underscored by the fact that US-based Citibank and American Express were two of the major proponents of liberalization in services (Oxley, 1990, p. 187). India particularly opposed moves to liberalize trade in services because the Indian government owned the nation’s important service industries, such as banking, insurance and airlines (Desai, 1989, p. 106). India viewed the proposal to include trade in services as an attempt to accommodate international capital. It took this view before it had studied the implications of trade in services or the prospects for the Indian economy (Patnaik, 1997, p. 136). India feared that banking and insurance firms from developed countries would swamp developing countries. Meanwhile developing countries would be unable to exploit their comparative advantage in labor-intensive sectors because new agreements would not liberalize cross-border labor movement (GATT Trade Policy Review Mechanism, 1993, p. 39). Developing countries such as India used the infant industry argument to justify protecting their service producers from competing against developed countries’ capital investments, knowledge base and scale economies. The issue was doubly sensitive, given the perception that service industries were integral to security and development. Yet when a group of developing countries joined with small developed countries to push for a new round, the G10 became increasingly isolated. A group of forty nations agreed on a draft (the Swiss–Colombian draft) to launch a new round. Many feared that the trading regime would collapse, leaving developing countries vulnerable to developedcountry trading blocs. Representatives of India and Brazil finally agreed, at a side meeting with the US at Punta del Este, to include services in a separate negotiating framework (Oxley, 1990, pp. 143–4). These countries secured a commitment that negotiations on services would recognize their development needs (Patnaik, 1997, p. 137). India was equally opposed to the inclusion of intellectual property rights on the agenda, arguing that this issue was better left to the World Intellectual Property Organization (WIPO) (Croome, 1995, p. 130). The Indian Ambassador to the GATT, B.K. Zutshi, explained India’s concerns that allowing the multilateral trading regime to police intellectual property rights would transfer monopoly rents to multinationals in developed countries (Zutshi, 1998, p. 41). The debate was influenced by the fact that developing countries held only 1 percent of the world total of

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patent grants. Furthermore, developing countries held only one-seventh of the patents in their own countries although more than 90 percent of the foreign-owned patents were never used in production processes in developing countries (UNCTAD T&D, 1987, p. 157). While India ultimately agreed to participate after a deal was struck to negotiate trade in services, it continued to try to limit the scope of negotiations. India led a group of thirteen developing countries opposing the inclusion of services until the Mid-Term Review in 1989.5 These countries maintained that stronger protection for patents and copyright would impede their development, denying them access to things such as pharmaceuticals and new plant varieties (Zutshi, 1998, p. 43). India sought throughout the round to reduce the terms of patents from the proposed twenty-year period and to maintain maximum flexibility in the area of compulsory licensing. It particularly wanted to ensure that companies could compulsorily license the production of pharmaceuticals for national health purposes where the licensee did not produce these products in developing countries (Zutshi, 1998, p. 46). Furthermore, India with Malaysia and Tanzania, led the charge against including investment measures in the GATT purview. This group argued that developing countries must reserve the right to set the terms of entry for foreigners. However the group agreed to a case-by-case examination of such measures. Trade measures were considered to be the ‘big stick’ that developing country governments needed to wield over powerful TNCs to protect the national interest (GATT Trade Policy Review Mechanism, 1993, p. 39). India claimed that measures such as local content requirements, manufacturing requirements and licensing were important ways of influencing multinational companies to ensure that they took account of development concerns. The Indian submission argued that investment policies should remain under national government control (Patnaik, 1997, p. 133). In a similar vein, India also led developing countries in opposing GATT reviews of countries’ trade policies (Croome, 1995, p. 159). India’s position on agriculture was mixed. India proposed that the new regime should eliminate, in principle, all trade-distorting government subsidies and the use of NTBs and should bind all agricultural tariffs (GATT Trade Policy Review Mechanism, 1993, p. 39). However, the Indian government pushed for the new WTO rules to allow developing countries to subsidize their exports and their need to protect food security through waivers and similar measures (GATT Trade Policy Review Mechanism, 1993, p. 39). As an Indian government official remarked: ‘the level of the subsidies in the developing countries is much lower

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compared to the developed countries. As long as the percentage of subsidies of the developed countries does not come down to the level in the developing countries, it is not justifiable to insist that the poorer countries lower their existing subsidies’ (Patnaik, 1997, p. 126). At the same time, India was among those developing countries that strongly pushed developed countries to liberalize trade in areas that affected developing countries. While they had reaped the benefits of tariff reductions in earlier rounds, India argued that developed countries had failed to adapt to structural change. It was among the group of developing countries that called for the ‘fullest liberalization of tariff and all non-tariff measures affecting exports of [tropical products and natural resources], including their semi-processed and processed forms’ (Croome, 1995, p. 59). Equally, India opposed unilateral trade measures and advocated stronger disciplines to prevent such power politics (GATT Trade Policy Review Mechanism, 1993, p. 39). India argued vigorously against the use of nontariff measures, such as VERs, and particularly, the continuation of the MFA. India’s then Chief Textile Negotiator, B.K. Zutshi, made it clear that the round could not be successfully completed without a commitment to kill off the MFA (Patnaik, 1997, p. 122).

New image, new interests Recognition among traders that they were increasingly interdependent, homogenous in terms of their socio-economic policies, shared a common fate and had greater need for self-restraint precipitated a change in their collectively held ideas about trade. India also experienced this change, and this influenced a change in its policy towards the Uruguay Round. These new systemic conditions were caused and experienced in different ways in different countries. States came to understand these changes in various ways during the 1980s and 1990s. Nonetheless, this caused the Third World identity within the international trading system to fragment as states adopted new pro-trade practices. India’s changing policies were part of this process. India’s foreign exchange crisis in the early 1990s contributed to its interdependence with other countries in trade. This crisis and the need to earn foreign currency clearly influenced India’s belief that its fate was deeply associated with the fate of the multilateral trading regime. As a corollary, India, like other developing countries, began to recognize that its fate was allied with that of other traders. The threat of growing protectionism thus became more significant. This provided an incentive for self-restraint, as well as a deepening sense that this restraint in trade

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was a legitimate practice among traders. The growing need for new export markets and rising protectionism in developed countries gradually made formerly vehement opponents of the GATT regime, such as India, more interested in the regime’s future (GATT BISD, 34S/532, L/6241). India’s foreign exchange crisis in 1991 provided the impetus for dramatic policy change, although debate on the need for change had begun in the 1970s (Ahluwalia, 1996, p. 17). Indian borrowings had increased dramatically during the 1980s as imports increased disproportionately to the increase in exports. While India’s current account deficits averaged 25 percent of exports from 1982–84, they surged to 40 percent of exports between 1985 and 1990. Consequently, the Indian government was forced to borrow heavily from the IMF and commercial sources in order to cover these deficits (Joshi and Little, 1996, pp. 14, 56). The debt service ratio reached 30 percent in 1991, up from 22 percent in 1985–86 (World Bank, 1996, p. 175). While successive governments had attempted to reform taxation, the income tax base remained narrow, complicated by federalism (Lewis, 1995, pp. 307–8). Imports were financed by short-term borrowings and total public debt as a proportion of GNP doubled to nearly 60 percent (World Bank Development Report, 1990). India’s dependence on relatively short-maturing borrowing raised the spectre that international investors would shift their capital to safehavens (Ghosh, 1995, p. 111). This risk was exacerbated by a sudden increase in oil payments after the Gulf War, the loss of access to Iraqi markets and the expulsion of thousands of Indians working in the Gulf (Mayer, 1992, p. 27). Whereas India previously might have weathered such a shock without much difficulty, unsustainable macroeconomic policies throughout the 1980s made its position precarious (Joshi and Little, 1996, p. 14). By June 1991, India’s foreign exchange reserves had dropped to less than $1 billion – scarcely enough to meet international repayment obligations. India’s credit rating was downgraded as the country grew close to defaulting on its international commitments and it was denied access to external commercial credit markets. The Indian government was forced to borrow against the security of its gold reserves (Lewis, 1995, p. 306). India’s interdependence with the international economy had objectively increased. This provided the opportunity for the Indian government to take a greater interest in the multilateral trading regime. To be sure, although interdependence does not necessarily precipitate cooperation, it did lead to a new policy approach in India despite the history of mistrust of Western institutions. The balance-of-payments crisis and the seemingly great gains for export-oriented industrialization experienced

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in East Asia prompted India to reassess its import substitution policy (World Bank, 1996, p. xvii). Increasing trade interdependence associated with changing trade patterns eroded Third World coalitions – and India’s position at the apex. Many developing countries found common interests with some developed countries in key issue areas as intra-industry trade caused the former to diversify their exports. Moreover, while debate between countries with competing national interests characterized the Uruguay Round talks – just as it had other trade negotiations – the commitment to multilateral liberalization emerged stronger than it had earlier. This is not to suggest that the sense of common interest led countries to sacrifice their perceived national interests at substantial cost. Rather, national interests increasingly reflected the need for some self-restraint in order to secure gains from cooperation. Nonetheless, the effect of this change was significant, changing the identities or roles countries played in negotiations. It was particularly significant for India, which had been a vehement opponent of the trading regime (GATT Trade Policy Review Mechanism, 1993, p. 38). India had traditionally had limited exposure to international trade, thanks to its size, and its trade arrangements with the USSR (Lewis, 1995, p. 46). However, it depended increasingly on the international economic system when the Soviet Union, collapsed in 1989. The former Soviet Union was no longer in a financial position to provide economic assistance and Russia pressured India to repay its outstanding 10 billion rouble debt (Mayer, 1992, p. 60). The loss of the barter trade with the USSR exacerbated India’s foreign exchange problems. As former in-kind transactions were monetized, the country’s stock of liquidity became unstable (Lewis, 1995, p. 305). Soviet defense assistance had also been important, supplying two-thirds of India’s major military hardware (Mayer, 1992, p. 60). However, the material effects of this crisis did not determine the nature of the change. Common fate does not necessarily lead to cooperative behavior or to the creation of a collective identity (Wendt, 1999, p. 352). The correlation between the objective condition of having a common fate and the subjective condition of collective identity depended on having an epistemic community to disseminate this new belief system or set of social rules. The policy change was influenced by a general change in international thinking about economic management. With the collapse of the Soviet Bloc in 1989, the broad acceptance of market-oriented development strategies, and the extension of classical liberal economics throughout much of the developed world, differences between nations’ socio-economic policies narrowed.

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The epistemic community of economists helped to identify a common interest in exercising self-restraint to promote multilateral trade. This group highlighted the need to prevent traders drifting towards protectionism and discrimination. At the same time, the group emphasized that trade liberalization led to economic growth in developed and developing countries (GATT Leutwiler Report, 1987). Studies of export-oriented industrialization in East Asia that championed the role of exports in development helped to sustain this discursive shift. Furthermore, India’s comparatively limited growth under an ISI model was held up as an example that such policies had failed. Whereas countries such as South Korea, Taiwan, Malaysia, Indonesia, Thailand, Brazil and Mexico achieved average annual growth rates between 9 percent and 15 percent between 1950 and 1984, India achieved only 3.5 percent (Sharma, 1993, p. 836). This comparison provided an incentive for policy change and grounds for self-restraint for the good of multilateral trade. The interests of the Self increasingly (although by no means entirely) became those of the trading community. Even where these interests were described as national interests, they implied self-restraint and giving priority to the collective trade interest over national or sectoral interests. The collapse of the Eastern Europe socialist bloc, which took with it a clear ideological alternative to integration with the international economy, was an ideological shock to Indian policy. Such a shock, as Florini observes, provides an environment in which policy ideas can reproduce rapidly across a population (Florini, 1996). Equally, the paradigm away shift from ISI limited legitimate alternatives for Indian policy-makers, who were faced with an increasingly bleak national economic situation. Amit Mitra’s view is common among Indian economic commentators: The mounting evidence against the efficacy of the ‘State-centred’ model has compelled [India] to rethinking. In other words, the very underpinning of the policy path pursued by India has been steadily undermined by the forces of history and by decades of mounting counter evidence. This has made the radical liberalization of India’s economy totally inevitable (Mitra, 1995, p. 124). The direction of such a policy change was certainly influenced by material power (Florini, 1996). Where there is an imbalance of relevant material capability, social acts will tend to evolve in the direction favored by the more powerful (Wendt, 1999, p. 331). All else being equal, those with the most material power tend to have the greatest influence over the society that emerges among a group of actors.

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Yet although the trading regime was originally fashioned to cater primarily to the needs of the industrialized countries, it came to incorporate numerous Third World perspectives (Patnaik, 1997, p. 17). Certainly, the US traditions of market liberalism were influential, as the US was a powerful ‘norm entrepreneur’ or purveyor of ideas. Nonetheless, the way in which these norms were appropriated by states was contingent on other domestic structures with which these norms had to coalesce.

The rise of the Indian entrepreneur Gradual domestic political change in India made it possible for the state to pursue a new international trade strategy. As the previous chapter explained, particular norms prevail over others because they are consonant with other prevailing norms. The Indian response to the foreign exchange crisis was also influenced by international coercion in the form of IMF loan conditionality. In this program, India undertook to reduce its fiscal deficit from 8.6 percent to 6.5 percent in the early 1990s. However, where this would have had limited application through domestic opposition previously, Bhagwati argued that these reforms had greater potency in the 1990s. He claimed that: The spread of reforms worldwide, before India was getting to them, meant that the IMF–World Bank conditionality could no longer be plausibly dismissed as ideological; it had been legitimated as a sensible prescription that only reflected what we had all learned in three decades of experience (Bhagwati, 1998, p. 35). Changes in India’s domestic structures influenced the way it interpreted and reproduced the rules and resources of international trade. For example, the domestic transition to market-oriented economics during the late 1980s and early 1990s was particularly important in ensuring Indian support for self-restraint and disembedded liberalism embodied in the Uruguay Round agreements. This made India’s socio-economic policies more homogenous with those of other negotiating traders. India’s commitment to state-led industrialization had substantially survived external economic and political pressures prior to the 1990s, despite impetus for market-oriented reform during the late 1970s and 1980s (Siddiqui, 1994, pp. 6–7). However policy structures began to change gradually (Lewis, 1995, p. 28). Although the bureaucracy favored state-led industrialization, a growing section of the Indian economic

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community was influenced by the paradigm shift in favor of disembedded liberalism. India’s established political and social policy structures prioritized the public sector and building national industries to compete with imports. However, expert committees, including the Alexander Committee on Import–Export Policies and Procedures (1978) and the Abid Hussain Committee on Trade Policies (1984) recommended trade liberalization. Trade experts were particularly keen to move away from a discretionary system of quantitative restrictions on imports and the Long Term Fiscal Policy announced in 1985 envisaged the eventual removal of import licensing from all imports except consumer goods. Nonetheless, the dominant view continued to favor protected local production until the early 1990s. Support for liberalization measures filtered through the Indian bureaucracy, business and media (Lewis, 1995, p. 320). As respected Indian economic policy adviser Montek Ahluwalia claimed: The objectives of the current reforms are based on a much clearer recognition of the need to integrate with the global economy through trade, investment, and technology flows and to create conditions which would give Indian entrepreneurs an environment broadly comparable to that in other developing countries, and to do this within the space of four to five years (Ahluwalia, 1995, p. 15). A new technocratic, managerial elite emerged in the 1980s and Indian development strategists began to redefine the nation’s development objectives (Ahluwalia, 1996, p. 17). This group pushed for a major change in perception necessary to redefine self-reliance. As eminent Indian economist Raja Chelliah explained, this redefinition would focus on paying for imports with export receipts with a small gap financed by equity capital. Rather than autarky, self-reliance should mean technological selfreliance in the longer term (Chelliah, 1996, p. 6). Such a shift required a new commitment to competitiveness. The traditional focus on equitable prosperity shifted to emphasize aggregate income growth which would ‘percolate down to the masses’ through employment growth. This new thinking within the bureaucracy coincided with a spirit of political change in India. Whereas previous Indian governments had supported populist socialism, the Rajiv Gandhi government was open to entrepreneurial advice (Rudolph and Rudolph, 1987, p. 229). His government gathered a group of outward-looking bureaucrats in its inner sanctum (Weiner, 1998, p. 608). This new group of bureaucrats

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influenced by Western economics was important in securing change in the 1980s (Ahluwalia and Little, 1998, p. 20). Mitra claims that in India as in other countries: Leftism is passe if not out all together and entrepreneurship is in. Import-substitution, the corollary of what was haughtily called ‘selfreliance’, is also out, and interfacing with the global economic process is in. Turning back the clock to the State-centred oligarchy (Indian socialism) will not be easy for any political party in future (Mitra, 1995, pp. 160–1). In particular, Manmohan Singh, an Oxford graduate, was instrumental as the reformist Finance Minister in the Rao government that substantially liberalized the economy. His appointment as finance minister in 1991 represented a sea-change in the Indian policy community. Singh was widely known as a respected member of the international economic community and a lonely voice of liberalization during the 1970s in India (Ahluwalia and Little, 1998, p. 3). Changing demographics also contributed to the new domestic political support for market orientation. Rising concerns over consumer welfare coincided with a rapidly growing middle class. Public opinion gradually lost patience with cronyism associated with the import licensing system. This system had granted arbitrary powers to bureaucrats and politicians, stifling innovation and production. The public opposed the ‘licensepermit raj’ and endemic corruption (Sharma, 1993, p. 897). In a society in which the state was responsible for creating equality, India’s import licensing system involved more than protecting infant industries. It became a way of protecting inefficient producers (Weiner, 1986, p. 607). Poor people therefore also supported economic reform, seeking lower inflation, cheaper consumer goods and rapid employment growth. Private groups formed economic and political coalitions to encourage continuing internal liberalization (McDowell, 1994, p. 504). Reserve Bank officials and Indian trade policy analysts suggested that the sense of urgency associated with the foreign exchange crisis provided the newly elected Rao government with the opportunity to make decisive reforms. The public was sufficiently ‘fed up to accept a new public interest line, sensibly and forcefully argued. For the time being, the opposition crumpled and the lobbies at least buckled’ (Lewis, 1995, p. 310). Within two weeks of being elected, the government had implemented a program of dramatic liberalization. The program included a 22 percent devaluation of the currency, considered to be

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politically risky in a country in which the strength of the currency was considered to be a measure of economic strength and power. An Indian policy analyst with the National Centre for Applied Economic Research, argued that while India’s reforms had proceeded slowly since the 1970s, the near economic crisis and a gradually changing mind-set was a precursor to the more radical economic reforms of 1991. His views are indicative of the predominant accounts of the transition.6 He observed: India’s think tanks and the policy makers realised that liberalization within a stronger multilateral trading system would provide India with greater strategic power in trade negotiations … India and other developing countries now realise that it is time to ‘grow up’ from the nascent industry argument to ‘adult competitive behavior’.7 Industries lobbied against these reforms but the spurt of economic growth that followed the reforms steeled the politicians’ resolve to continue with them. Even states such as West Bengal, traditionally a communist bastion, began to talk of attracting foreign direct investment ( Joshi and Little, 1996, p. 259). From June 1991, India rapidly reversed its import substitution strategy and began reducing the role of the state in the economy by introducing private competition in many sectors (GATT Trade Policy Review Mechanism, 1993, p. 12). The focus of the debate shifted from whether to liberalize the Indian economy, to how best to pace the process (Ahluwalia and Little, 1998, pp. 4–5). Amit Mitra claimed: There is no doubt that the greatest achievement of the industrial and other reform measures taken since July 1991, is the shift in the mindframe and philosophy of governance. Undoubtedly the government is making a bold and concrete effort to shift out of the State-centered model of development and move towards a market-centred model. It is also attempting to shift from the inward looking (import substituting) approach to the outward looking, export-promoting, and globally integrating outlook. At long last, the rhetoric of the Government is not vastly different from that of the policy measures flowing from it (Mitra, 1995, p. 134). The Rao government also set about wide ranging tax reform, including plans for a value-added tax to replace other indirect taxes, such as trade taxes, that provided 80 percent of tax revenue (Burgess et al., 1995,

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p. 13). The Chelliah Committee on Fiscal Reforms recommended that many concessions to industry should be abolished and savings should be directed into capital markets (Mitra, 1995, p. 153). Furthermore, the Rao government’s austerity budget aimed to reduce the Central government’s deficit by marginal revenue increases, defense spending cuts, as well as reductions in transfers to government enterprises. The Central government fiscal deficit was reduced from 8.4 percent of GDP in 1990–91 to 5.7 percent of GDP in 1992–93 (World Bank, 1995, p. xvii). To this end, the government cut subsidies to fertilizer production, sugar production and exports (Lewis, 1995, p. 311). It tightened monetary policy to reduce inflation and reformed the financial sector (World Bank, 1995, p. xxi). Trade reforms removed licensing in many imports of raw materials, intermediate and capital goods. They broadened and simplified export incentives and removed restrictions on exports. Exchange rates were initially partially liberalized and quantitative restrictions were largely eliminated, except for a few intermediate and capital goods and a few consumer goods (Ahluwalia, 1995, p. 21). The government indicated that it would gradually remove restrictions on consumer imports (Burgess et al., 1995, p. 19). Tariff reforms held center stage in the process of liberalization. Maximum tariffs were reduced from 400 percent in 1990–91 to 65 percent by 1994–95. By 1996 the import-weighted tariff had fallen to 27 percent from 87 percent in early 1991 (Ahulwalia, 1996, pp. 24, 25). Customs duties on capital goods were also reduced. The state gradually began to take a smaller role in industry policies. The government removed investment-licensing requirements and reduced requirements for public investment in particular industries (Lewis, 1995, p. 318). Exports responded well to the new trade policy and grew by about 21 percent (in $US terms) in the first ten months of 1993–94. Investment increased as international confidence was restored (Burgess et al., 1995, p. 27). The reforms precipitated expansion in new export industries such as computer software, establishing the nation more firmly in the minds of other traders as a participant rather than an opponent in trade.

Pro-trade policies India’s new behavioral traits as a trader occurred domestically and to some extent, through imitation of other traders. This initiated a process of identity change for India in trade negotiations. While India frequently disagreed with positions advanced by developed countries in

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the Uruguay Round negotiations, it changed the focus of its claims to favor market liberalization. To some extent, it redefined claims for special and differential treatment to focus on phased-in liberalization and technical assistance (Bhandari, 1998, p. 68). As India adopted new policies in favor of market liberalization rather than waivers, and reciprocity as a principle (with caveats), its identity as a protectionist opponent of the multilateral regime eroded. India’s commitment to self-restraint and its advocacy of a rules-based multilateral trading system, precipitated a process of identity change. India came to reassess its role and interests in the trading regime. Equally, other traders began to reassess their understanding of India’s role in multinational trade. While India had established a strong role with Brazil as an advocate of developing country interests in trade negotiations, this identity fragmented with the erosion of G77 solidarity (Patnaik, 1997, p. 127). New trading patterns transformed many former opponents of liberalization into supporters. India found that it was increasingly isolated in its opposition to the multilateral trading regime. Realization among India’s bureaucracy that the nation was losing prominence as an international actor with the decline of the G77 also prompted a reassessment of Indian interests. Prominent Indian economist Jagdish Bhagwati observed that India had a ‘superiority complex and an inferior status in international negotiations’. Consequently, he claimed that: India’s elite, including the bureaucracy, came to realise that there was a growing dissonance between India’s traditional claim to respect and attention, and her shrinking ability to command them as her economic policies [became] a subject of derision (Bhagwati, 1998, p. 38). Indian policy-makers and commentators began to reassess India’s interests in the trading regime (Desai, 1989, pp. 108–9). Whereas India had been one of the most vocal opponents of trade in services, it finally agreed to include them on the agenda on the condition that concessions on services were not to be traded off against concessions on goods. Its position softened as studies showed that liberalization in this area might open up new horizons for developing economies. Indeed, India’s share of export in services began to grow by 16 percent per annum (Gupta, 1994, p. 125). In redefining its former identity as a protectionist opponent of the regime and signaling its support for self-restraint, India helped to erode the egoistic identities that generally dominated policy choices in the

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GATT regime. India’s new policy stance contributed to the process through which countries redefined their interests in terms of cooperative trading relations. By supporting disembedded liberalism, legalism and a deeper superlateral trading system late in the round, India helped to change the regime’s normative tiers. India helped to establish a collective identity in the trading regime by committing to a rules-based trading system and adopting market mechanisms rather than embedded liberal waivers. In adopting pro-market policies domestically and supporting trade liberalization, India signaled a greater potential for cooperation in trade issues. During the Uruguay Round, India’s economic policy began to reflect the predominant disembedded liberal normative schema. Its domestic socio-economic policies were increasingly adapted to market disciplines and, in this sense, became closer to those of other traders. Not only was it more interdependent with the international community, India increasingly shared a sense that its interests lay with a stronger multilateral trading system (GATT Trade Policy Review Mechanism, 1993, p. 38). From being largely uninvolved and reactive, India became an active participant in the multilateral trade negotiations (Patnaik, 1997, p. 118). Given the growing importance of trade, India became increasingly vocal throughout the Uruguay Round about developed countries reducing market access for developing countries’ exports. The Indian negotiating team adopted a more flexible stance at the Montreal Mid-Term Meeting than it had done during the initial phase of the Uruguay Round (Patnaik, 1997, p. 120). An evaluation of the strategy found that it had paid off and the study called for ‘freshness, flexibility and consideration of how domestic policy changes were linked to the services negotiations’ (McDowell, 1994, p. 502). Indian negotiators began to realize that they could not be successful in trade negotiations merely by opposing the inclusion of services in the trading regime. Rather, a consultant to the Indian Ministry of Commerce advised that India should prepare its own list of services on which it would like negotiations. The consultant argued that developing countries should use the trading regime’s legal framework against developed countries where necessary (Narasimhan, 1987, pp. 182–3). By supporting the new GATT regime, developing countries such as India could arrest the trend among developed countries to use other forums that excluded developing countries. The consultant noted: Developing countries are in an absolute majority [in the GATT regime]. In GATT, there is only a ‘one nation, one vote’ regime; it is

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not like the IMF or the World Bank where there is weighted voting. Here a developing country can take initiatives on its own, provided its case is reasonable (Narasimhan, 1987, p. 179). India agreed to make commitments in particular areas of services, although it managed to keep banking, insurance and basic telecommunication sectors outside of the final agreement. Furthermore, India continued to argue for relaxation on restrictions of the movement of labor services (Croome, 1995, p. 314). Although it achieved less extensive reforms than developing countries had hoped, this pressure succeeded in gaining approval for temporary movement of skilled personnel to the developed countries (Bhattacharyya, 1994, p. 38). From its initial position in opposing a new round of trade negotiations, the Indian government came to claim that ‘India’s goal was to increase the strength and transparency of GATT rules and the principle of non-discrimination’. India ‘strongly favor[ed] the multilateral approach to world trade over inward-looking regional agreements’. In 1991, India issued a joint communication with twenty-nine other countries (developed and developing) to the Negotiating Group on Rule Making and Trade-related Measures in favor of unambiguous and strengthened GATT rules and disciplines. India also favored tighter rules on unfair trading practices to prevent antidumping and countervailing duties from being used as protectionist tools (GATT Trade Policy Review Mechanism, 1993, pp. 38–9). In this way, India helped to secure the transition from a system of power politics to one of legalism. Indian negotiators drew on disembedded liberal norms to argue that developed countries were undermining developing countries’ economic progress by limiting access to markets for products such as textiles and clothing. They also employed the norms of multilateralism and legalism to argue against unilateral measures such as America’s use of Section 301 legislation. Indian negotiators argued that: India’s exports have been encountering protectionist measures in some of their major markets. The continuation of such measures – or worse, intensification – could put serious roadblocks in the path of economic liberalization (GATT Trade Policy Review Mechanism, 1993, p. 13). As the Indian representative told the CTD in December 1994: developing countries’ participation in the multilateral trading system had taken place ‘not because of a conducive trading environment, but in spite of an adverse trading environment’. He particularly cited the exclusion of

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textiles and clothing and agriculture from GATT disciplines and ‘the increased tendency to protectionism in developed countries contrasted with the demand for an open, multilateral and non-discriminatory trading system now coming from the developing countries’. He underlined that ‘developed countries should have an interest in keeping their markets open to developing countries; they represented the emerging markets and some of these had proved to be the most dynamic in the world’ (GATT BISD, 41S (Vol.1)/105, L/7567). Although a relative newcomer to international trade in textiles and garments, India vigorously advocated integration of this sector into the GATT. It argued that the success of the Uruguay Round depended on eliminating the MFA (Patnaik, 1997, p. 122). While developed countries argued to extend the period of integration of textiles from ten years to fifteen years, India successfully resisted this. India also began to establish a role as the defender of multilateral and market principles against developed country recalcitrance. In this it began to identify with a Self of multilateral traders. For example, the Indian position on intellectual property was that the philosophy of the GATT was the promotion of free trade and fair competition, whereas the essence of the intellectual property regime was its monopolistic and restrictive character (Zutshi, 1998, p. 43). While India maintained opposition to the TRIPS throughout the round, its support among developing countries waned in 1991 and 1992. Developing countries ‘were keen to conclude the round, and for that purpose were prepared to make concessions to the developed countries in new areas of services and TRIPS. They bargained this against better access to developed countries’ markets’ (Zutshi, 1998, p. 45). Nonetheless, as Zutshi argues ‘this should not create the impression that developing countries failed altogether in achieving their objectives relating to TRIPS in the Uruguay Round’. Several of India’s concerns were addressed in the final agreement. Furthermore, whereas China accepted much stronger disciplines in bilateral negotiations, India achieved a better outcome in the multilateral regime, even though India had been isolated (Zutshi, 1998, p. 48). By adopting a new legitimate voice as trader, India, with other developing countries, changed the generalized understanding of Self and Other in the trading regime. This new culture of superlateralism changed the dynamics of influence in the trading regime, as power politics became an illegitimate way for developed countries to deal with developing country demands. India was equally determined to prevent developed countries from using environmental and labor standards to discriminate against

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exports from developing countries. As the previous chapter explained, while the US and European countries attempted to ensure that environmental and labor standards might be used to protect their higher-cost industries from lower-cost imports, developing countries such as India demurred. They objected to the way in which the US and France had attempted to include a social clause in trade rules as the Uruguay Round was almost completed (Srinivasan, 1996, p. 6). Indian economists were among the most determined opponents of such measures, drawing on the predominant neo-classical economic literature to argue their case. They argued that advocates of minimum labor standards, for example, overlooked the legitimately different values that often lead to differences in labor standards across societies (Rodrik, 1996, p. 32). Advocates of social standards also tended to overstate the differences in the price of labor in developing countries, given differences in productivity. Indian economist T.N. Srinivasan argued that developed countries were concerned with low labor standards in developing countries, they were often less enthusiastic about enforcing their own labor standards. He argued that: [T]here is a curious asymmetry in the contents of the proposed clause: they focus almost exclusively on those labor standards which are presumed to be ‘low’ in developing countries and not on those equally plausible ones which are absent in many, but not all, developed countries. The asymmetry is unlikely, if the driving force behind the social clause is some universal moral concern with labor standards (Srinivasan, 1996, p. 14). In effect, many argued, developed countries were denying developing countries to use their abundance in labor as a means of trading out of their poverty. Given that trade measures were generally inefficient instruments for addressing such issues, India opposed including a social clause in the WTO. Indian negotiators also countered this pressure by raising immigration as an issue, particularly the movement of technical personnel including software engineers to the US (Gupta, 1994, p. 124). By the same token, while India ultimately supported the creation of a CTE in the WTO regime, it aimed to ensure that this body would help to prevent discrimination. Indian economists argued in favor of free trade and diversity of environmental standards across countries, with environmental externalities redressed through appropriate taxes or subsidies (Bhagwati and Srinivasan, 1975).

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Indian economists and trade policy-makers claimed that while India supported sustainable development, it intended to prevent developed countries using environmental standards to discriminate against developing country goods (WT/MIN (99)/ST/6, November 1999). As the Indian Minister of Commerce and Industry, Murasoli Maran told the Seattle Ministerial conference in 1999: India in good faith had agreed at Marrakesh to the establishment of a WTO Committee on Trade and Environment. We would, however, strongly oppose any attempt to either change the Committee’s structure or mandate which can be used for legitimizing unilateral trade restrictive measures. Attempts aimed at inclusion of environmental issues in future negotiations go beyond the competence of the multilateral trading system and have the potential to open the floodgates of protectionism (WT/MIN (99)/ST/6, November 1999). Or as Srinivasan explained: If Brazilian rain forests must be saved to minimize the cost of a targeted reduction in carbon dioxide emissions in the world, while the US keeps guzzling gas because it is too expensive to cut that down, then so be it. But then this efficient cooperative solution must not leave Brazil footing the bill! Efficient solutions, with the compensation and equitable distribution of the gains from the efficient solution, make economic sense (Srinivasan, 1996, p. 21). This policy approach successfully diluted the opportunity for developed countries to use social standards as trade protection and prevented social issues from figuring in the Marrakesh Declaration (Gupta, 1994, p. 124). Furthermore, India’s support for a stronger dispute settlement mechanism contributed to the normative change from power politics to legalism in the new regime. While India was not a demandeur of a stronger dispute settlement system, it came to actively support this as a means of preventing developed countries from unilaterally pressuring weaker countries for trade concessions. A stronger rules-based system was regarded as a means of redistributing power within the multilateral trading system. India agreed to accept stronger rules for dispute settlement – even in areas such as services and intellectual property. In this, India signaled a departure from its role as Outsider to the multilateral trading regime. In fact, the Dean of the Indian Institute of Foreign Trade, Dr B. Bhattacharyya concluded that the new trading regime represented the culmination of a multilateral world order. He concurred with the views expressed by the Morrocan King Hassan II at

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the closing ceremony who claimed that: By bringing into being the World Trade Organization today, we are enshrining the rule of law in international economic and trade relations, thus setting universal rules and disciplines over the temptations of unilateralism and the law of the jungle. This collective profession of faith actually marks the end of the Colonial Pact and embodies genuine interdependence. Regardless of the size of our economies, from now on we shall all enjoy the same rights and be subject to the same obligations. We share the same goals and must meet the same challenges: tackling the scourge of unemployment, redressing the problem of social exclusion, or finding appropriate ways of responding to our environmental and other concerns (Bhattacharyya, 1995, pp. 5–6). India became a signatory to the unified WTO agreements at Marrakesh. Although its tariffs remained comparatively high, it agreed to bind approximately half of all tariff lines during the Uruguay Round – a dramatic increase on the 1 percent previously bound (GATT Trade Policy Review Mechanism, 1993, p. 5). In contrast, serious divisions between the US and the EC over issues such as agriculture, intellectual property and services delayed resolution of the Uruguay Round – not Indian or developing country opposition (Siddiqui, 1994, p. 5). India’s negotiator and Chairman of the GATT Contracting Parties, B.K. Zutshi sent a memo to the EC and US negotiators on behalf of his colleagues at the eleventh hour of negotiations in 1993. The message said: ‘Get your act together. This is the last chance, more or less’ (Croome, 1995, pp. 367–8). By adopting new cooperative trading policies, including self-restraint and supporting stronger rules, India adopted a new role as a multilateral trader. In sustaining these practices over time and starting to see itself differently with respect to other traders, India began to accept this new identity as legitimate rather than merely useful. India also cast its trading partners in a new cooperative role. GATT participants ‘recognized India’s active participation in, and commitment to the GATT’ (GATT Trade Policy Review Mechanism, 1993, pp. 4–5). The Indian representative reassured other traders that that self-sufficiency was a goal only in agriculture. In other sectors, the objective was to create internationally competitive industries, in part through liberalizing imports. He emphasized that steps by India’s trading partners were a vital element of support for the Indian reform process (GATT Trade Policy Review Mechanism, 1993, pp. 4–5).

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This new identity prevailed following the Uruguay Round. For example, India joined with countries such as Japan and Australia, as well as East Asian countries, to oppose attempts to introduce discriminatory social standards in the GATT (Srinivasan, 1996, p. 14). Certainly, the change has not been so dramatic that India has abandoned its concerns with differentially introducing trade measures. India’s position at the Seattle Ministerial Meeting in 1999 reaffirmed the need for a fair and equitable multilateral regime. India’s Minister of Commerce and Industry, Murasoli Maran also insisted that existing commitments should be implemented before new issues could be addressed (WT/MIN (99)/ST/16). However, whereas India had previously opposed market discipline, it argued for greater market discipline during the Seattle talks. In this way, India has begun to reassess its interests in terms of other multilateral traders and internalize its new identity. Whereas India’s interests had been conceived of as being divergent from those of other traders, it began to identify shared interests in the trading regime (Patnaik, 1997, p. 141).

Conclusions India’s transition from the protectionist Other to form part of a new Self of multilateral traders can certainly be analyzed in terms of changing incentives, as traditional theories would suggest. However, this tells only part of the story. India’s transition from a protectionist and suppliant to become an advocate of stronger multilateral trade rules reconstituted its identity. By repeatedly adopting a pro-trade stance in trade negotiations, India and other negotiating parties established a new cooperative role in the WTO regime. Although India remained outspoken in the interests of developing countries, it formed new alliances with developed countries to strengthen market disciplines over new areas such as social issues. Consequently, India’s new approach to trade helped to change the regime’s normative structure from limited multilateralism to superlateralism in which developing countries had a legitimate voice in trade negotiations. In constructing a new role as reciprocal trader during the Uruguay Round, countries such as India changed the meaning of power and interests in the trading regime.

Conclusion

In examining the way developing countries changed their role in trade negotiations and the implications for the trading regime, this book has used a different kind of light to that which is normally used in such a project. The kind of light normally used in neorealism, neo-Marxism and neoliberalism generally reveals states’ actions in bold outline against a clearly defined material world. Norms and meaning are merely shadows under this light, providing little definition of the scene. In this context, regimes such as the trading regime have no structural purpose. In contrast, this book has used a light that brings norms and meaning into the foreground. In so doing, it has redefined the actors and revealed a new and textured play. Under this light, actors are defined by the shadows. Obviously, as different tools are used for different purposes, the constructivist or sociological light that I am describing here should be seen as a tool for explaining the processes of change in the trading regime. Traditional theoretical analyses of the trading regime tend to find it to be a framework in which states with preformed interests interact. In these conceptualizations, regimes are founded on material power and interests. These theories focus on the effects such regimes have on states’ behavior. In explaining interaction between predefined actors and predicting the outcomes, they have tended to underestimate the nature and extent of this interaction, failing to see how it changes states. They also tend to underestimate contingency. Change in these theoretical models is generally understood in shorthand – stages of responses to a change in incentives or material circumstances. In these models, actors might hold interests and ideas in common, and in the case of neoliberalism, for example, they might be influenced by regimes. But in rationalist theory, actors hold these ideas 187

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independently. In materialist models, or models based on clout, interests generally are defined by something outside the regime and outside interaction. Even neoliberalism, which accepts that regimes can change the way states calculate their interest by providing information and incentives, argues that these calculations are separately formulated. Equally for Gramscian neo-Marxists, the fact that power is materially defined in the final instance implies that there is limited possibility for those outside the hegemonic bloc to influence meaning. In these schemas, regimes are, in essence, the instruments of rational actors and usually they are the instruments of those with material power. Regimes might change incentives or perpetuate an ideology; they are coercive and persuasive, acting on states and through states. This has important implications for understanding what power is and how it is exercised in regimes. When power is conceived of in a material sense, its scope is extremely limited; influence and power are effectively synonymous. In this context, states lacking material power have only limited opportunity, if any, to influence change and policy outcomes in regimes. This assumes that the meaning of power in a particular social setting is fixed. So in denying that regimes construct actors and vice versa, materialist theories overlook the agential power that all states have. All states help to construct the social world in which they live – even if this world is not one that they would choose. This oversight (even if for functionally important reasons) has left materialist theories at a loss to explain the role of developing countries in strengthening the multilateral trading regime while the regime’s traditional supporters pursued protectionist policies. In understanding that meaning is contested and continuously produced through interaction, this book has explained power in international trading relations differently. It has argued that shared ideas predominantly construct or give meaning to power and interests in trade matters. The meaning of power in the multilateral trading regime is continuously constructed through interactions between thinking actors; reflexive actions produce meaning. So, influence in the trading regime is not dependent on material power, as all actors are engaged in the production of meaning. Monopoly power is not sufficient to determine policy outcomes. This insight has helped to explain the process through which developing countries’ roles changed during the Uruguay Round. It has also gone towards answering the question of whether countries without trading clout can ‘speak’ in the multilateral trading regime.

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Recognizing the trading regime as an international structure of shared ideas about trade, this book has shown how the WTO regime changed the meaning of power and consequently, the distribution of policy influence. The trading regime not only constituted legitimate actors in trade negotiations, it provided resources enabling developing states to influence policy outcomes. This was evident in the way developing countries used the norms of disembedded liberalism and legalism to circumvent the threat of environmental protectionism from developed countries. Generally, ideas advanced by materially powerful states in regimes are considered to be intellectual arm-twisting. However, while theoretical approaches such as neo-Marxism and neorealism tend to understand regimes and ideas as predominantly coercive, a social theory approach provides a different insight. Certainly, a set of ideas tends to dominate a social space or interactive relationship, universalizing particular interests. This is particularly likely in a social space historically dominated by Western Enlightenment conceptions of reason and rationality – such as the multilateral trading regime. But because meaning is not fixed, all states have the potential to invest norms with their own meaning – within limits. The social theory insight that states continuously construct their identities and interests through representational practices suggests that all states have the potential to change the meanings that construct power in a social context. Whereas traditional theories tend to emphasize coercion or instrumental reasons for developing countries’ supporting trade liberalization, a constructivist analysis suggests that sustained practice and the meanings it generates are more important. In sustaining pro-trade practices over time, developing countries eroded their old identities as the protectionist Other and developed a new conception of Self. Developing and industrialized countries internalized this new role and began to calculate their interests differently as a result. New cooperative trading behavior helped to erode developing countries’ former identity in the GATT regime as the protectionist Other. As developing countries acted in favor of trade, developed countries were forced to reassess their understanding of them and developing countries reassessed their understandings of themselves. Hence they respectively redefined the boundaries between Self and Other. This process essentially changed the culture of the trading regime from a regime in which interests were calculated independently to a cooperative one. In the new superlateral WTO regime, states identified their own interests with those of the group of multilateral traders.

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This is not to say that the trading regime has necessarily become a deeply socialized regime based on friendship or that trading states fully identify with other traders. The question of whether the collective identity of reciprocal trader will become deeply socialized remains open, given that chance and unintended consequences are as important in identity formation as intention. Furthermore, social meanings are always open to contestation to varying degrees. It is difficult to gauge the extent and nature of the policy change without examining sustained trade policy stances in particular developing countries more closely. More research needs to be done at an individual state level to determine the extent of this socialization, as this will depend on the coherence of these international trade norms with domestic norms. It will also no doubt depend on the sustained responses they receive from developed countries in the trading regime. Developing countries will not continue to use disembedded liberal norms and legalism if developed countries increasingly sidestep the rules in important areas. An analysis of the changing culture of trade policy relies on observations over a longer time frame than I have been able to use here. Nonetheless, at first cut, a social theory of the Uruguay Round sheds light on the way developing countries have applied new trade norms. For this moment, the new trading regime has produced a decentralized authority based on the legitimacy of disembedded liberal norms among both developed and developing countries. Disputes between states no longer contest market orientation per se, rather states generally argue about the implementation of liberalization programs. In recognizing the constitutive aspect of norms (and regimes), social theory therefore reveals more in the transition from the GATT to the WTO than traditional theories have countenanced. While they have considered the WTO regime to be a continuation of the GATT regime, complete with its distribution of influence in favor of the materially powerful, a constructivist analysis has shown the WTO to be qualitatively different. Whereas the GATT regime was a limited multilateral regime based on embedded liberal socio-economic norms and power politics, the WTO is a stronger regime based on disembedded liberalism and legalism. It aims to secure self-restraint in national trade policies in the collective interest of traders. Thus the social theory tool kit better explains the dynamic processes of regime change. Recognizing that regimes and agents are continuously in process and mutually defined, a constructivist approach reveals how regimes change states and vice versa. In its emphasis on the meanings states attach to their interactions, social theory is better able to explain

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how developing countries reversed their role as the protectionist Other and redefined their interests during the Uruguay Round trade negotiations. In acknowledging that interaction changes states and their interests, and in recognizing that this process is contingent, yet largely path dependent, such an analysis provides limited scope for generalized predictions. This project should be seen as a distinctly different project to those of neorealism, neo-Marxism and neoliberalism. Neorealist tools might be useful in explaining (and justifying) positional relations in an anarchic international environment, and neo-Marxist tools might provide a critical account of the relations of resource distribution in a regime. Neoliberalism might also help to generally predict rational behavior in situations of limited interaction. However, a social theory approach is most useful to understand the social construction of power and the interdependent relationship between state and structure. As meaning constructs power and all states are involved in producing meaning, all states, even those without material power, can use dominant norms to influence policy outcomes. This is an important insight that might be applied to other areas of international relations such as in human rights and the evolution of democracy. Perhaps this finding might be generalized. It would be particularly useful to compare the way this process influences policy in different kinds of institutions. Perhaps meaning is more malleable in particular kinds of international institutions – say in the World Bank rather than in the IMF. This has not been an emancipatory project. It recognizes that socialization can create enemies as a legitimate role relationship, just as easily as it creates friendship. Socialization might construct a system of conflictual relations between states that become legitimated through repeated interaction. Neither is the process of norm selection an inherently democratic one. Given the historical and social conjuncture in which multilateral trading regime has evolved, there is a culture of rationality that universalizes particular interests and values. Nonetheless, the culture of international trade is more negotiated than most have traditionally understood.

Notes Preface 1. Hereafter I will use GATT to refer to the regime based on the GATT (1947) although it should be remembered that the WTO administers a new GATT (1994).

Introduction: Trading Traditions: Straw Arguments in North–South Trade 1. It should be noted that trade liberalization without appropriate governance has resulted in exploitation in many countries. Trade liberalization is more sustainable and successful in increasing welfare in developing countries in the long term where inequalities are addressed. 2. Initially this group comprised twenty-four developing countries: Argentina, Bangladesh, Brazil, Burma, Cameroon, Colombia, Cote d’Ivoire, Cuba, Cyprus, Egypt, Ghana, India, Jamaica, Nicaragua, Nigeria, Pakistan, Peru, Romania, Sri Lanka, Tanzania, Trinidad and Tobago, Uruguay, Yugoslavia and Zaire. By the middle of 1995, it had reduced in size to ten countries: Argentina, Brazil, Cuba, Egypt, India, Nicaragua, Nigeria, Peru, Tanzania and Yugoslavia. 3. Self-defined developing countries are not automatically accepted as such in some WTO bodies. Least developed countries are considered to be those as defined by the UN. 4. Cf. UNCTAD, 1991, p. 173; Bhagwati, 1997, p. 263; Ford Foundation Report; Martin and Winters, 1996; Patnaik, 1997. 5. To an extent, I draw on Anthony Giddens’ structuration approach for an understanding of the mutually constitutive relationship between states as agents and structures (see Giddens, 1976). 6. For a detailed discussion of the ontological foundations that establish states as unitary actors in systemic analysis, see Wendt (1999, chapter 5). 7. Peter Haas explains that epistemic communities are networks of knowledgebased experts with recognized competence in a particular domain. These communities frame the issues for debate, propose policies and enable those in power within states to identify interests (Haas, 1992, pp. 2–3).

1 Theorizing the Uruguay Round: The Case for Constructivism 1. The term ‘strong’, in this sense, refers to states with a preponderance of military and economic power. 2. In this model, interests and identities are formed at the unit level and are exogenous to the model. While they might change and subsequently cause 192

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3.

4. 5. 6. 7. 8. 9. 10.

11.

12.

13. 14.

15.

16. 17.

a change in regime, the process is not included in the neoliberal analysis (Wendt, 1999, p. 315). Within these parameters, neoliberals use iterated prisoners’ dilemma models to show that states can cooperate in situations of conflicting and complementary interests (Axelrod, 1984). Simple learning implies modifying behavior in response to changing incentives. It does not involve identity change. States that stick to the rules face the risk that they will be the ‘suckers’ while other states cheat. See for example Mearsheimer, 1995, p. 82; Gilpin, 1987, pp. 72, 74; Williams, 1994, p. 33. That is, how much more militarily stronger one country is over another. See for example, Kindleberger, 1973; Gilpin, 1981; Kennedy, 1988; Krasner, 1976; Gowa, 1993. For a discussion of institutional autonomy see Hobson, 2000. This repudiates the earlier development theories that prevailed in the 1960s which suggested that socialist developing countries might successfully transform the international trading regime from the outside. These theories formed the intellectual foundations for import substitution industrialization strategies (ISI) employed in developing countries during the 1960s and 1970s (Singer and Ansari, 1988, pp. 6, 28). Kondratief cycles consist of 25-year periods of economic expansion and 25-year periods of economic decline. George Modelski modifies this analysis to employ 100-year cycles in his world systems analysis (Modelski, 1978). Cox sees a new configuration forming around the cleavage between national classes and international classes; capital and labor based nationally and that based on international production and financial systems (Cox, 1996, p. 111). Political action will determine whether progressive alternatives coalesce internationally. See for example, Amin, 1982, pp. 144–5; Wallerstein, 1979, p. 23. Krasner notes that developing countries’ weak domestic political and social systems undermine their ability to make societal adjustments that could cushion external shocks. Institutional weakness also makes developing countries reliant on trade taxes, limiting their ability to liberalize trade (Krasner, 1985, pp. 3, 4). The report, coordinated by John Whalley, involved fourteen scholars from eleven developing countries and a smaller number from the developed world who reported on trade issues of importance. The report focused on developments within developed and developing countries and within the system as a whole. For an explanation of this, see Kier, 1997 and Katzenstein, 1996b. This typography considers two forms of identity: corporate identity and social identity. The former refers to intrinsic qualities that constitute actor individuality, such as consciousness and body. For organizations, this entails the shared beliefs and institutions which enable constituent individuals to act as ‘we’. This also generates interests such as physical security, predicability in relationships to the world, recognition as an actor and a pursuit of the ‘good life’. Social identities are sets of meanings that actors attribute to themselves while considering the perspective of others. Whereas corporate identity

194 Notes is singular, actors usually have many social identities. This identity relies on a sense of Other in order to create a sense of Self (Wendt, 1996, pp. 50, 51). 18. This means that properties at one level are fixed by those at another but are not reducible to them – just as the mind is related to the brain (Wendt, 1996, p. 49).

2 Re-thinking Trade Rules 1. This draws on Wendt’s discussion of the formation of a collective identity in which the interests of the Other are regarded as being integral to those of the Self (Wendt, 1999). It is not a totalizing claim, neither does it presume that disputes do not occur. Rather, the meaning of these disputes is different. 2. This term suggested by John M. Hobson in conversation, refers to a deep form of multilateralism in which countries outside the OECD influence policy outcomes. 3. Rules perceived as legitimate are more internalized than those produced by actors purely following their self-interest or those that are achieved by coercion. This does not imply that legitimate rules are necessarily cooperative rules (Wendt, 1999, p. 268). 4. Although the GATT was an intergovernmental treaty rather than an international organization or a legal entity in its own right, it evolved into a quasi organization, producing a greater sense of collectivity in trade issues over time (Hoekman and Kostecki, 1995, pp. 12–15). 5. A win for one is a loss for the other. 6. Recall that these master variables or system characteristics change in multiple ways (Wendt, 1999, chapter 7). 7. The Uruguay Round achieved ten important things. It reduced NTBs, phased out the MFA, and extended GATT disciplines to intellectual property and investment under the TRIPS and TRIMS respectively. It brought tropical and temperate agriculture under WTO disciplines. It also extended GATT discipline to services such as financial services, telecommunications, transportation and movement of people and it changed safeguard provisions. It created a legal entity to administer rules (the WTO) and affirmed commitment to the multilateral trading system (Van Djik, 1996, p. 4). 8. Prior to the Uruguay Round Britain’s nineteenth-century repeal of the Corn Laws had been the only significant agricultural trade liberation in three centuries (Anderson, 1996, p. 40). 9. By 2000, export subsidies in industrial countries were to be cut by 36 percent in value terms, and by 24 percent for developing countries. Domestic farm subsidies were to fall by 20 percent and 13.3 percent respectively. 10. For advanced economies as a whole, the average tariff on these goods was scheduled to fall from 15.5 percent to 12.1 percent by 2005 (Schott, 1994, p. 59). 11. For example, Brazil and Venezuela versus the US over American gasoline regulations (WT/DS2/R, January 29, 1996 in Chaytor, 1998, p. 264).

3 US Trade Policy: Mixed Messages 1. The Cairns Group comprised: Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Hungary, Indonesia, Malaysia, Philippines, New Zealand, Thailand and Uruguay.

Notes 195 2. For a discussion of the economic liberal program see Henderson, 1998, pp. 23, 43. 3. The SIA, comprised of more than fifty of the major chip manufacturers, was established in the 1970s to respond to the Japanese challenge (Krauss, 1994, p. 268). 4. It specifically argued the embargo contravened Article XI forbidding quantitative restrictions, Article XIII because it imposed discrimination for a specific geographical region and Article III, the national treatment clause. This was because the average kill rate for dolphins was not known until the end of the season and Mexico would not therefore know until then whether it could sell its tuna. 5. The dispute was resolved in 1997 after Mexico and ten other countries agreed to cap their annual dolphin kill at five thousand animals a year (Vogel, 2000, pp. 81–2).

4 Trading Roles 1. This idea comes from conversation with Professor Linda Weiss. 2. These included Brazil, Burma, China, Ceylon, Chile, Cuba, India, Pakistan, Syria and Lebanon. However China, Lebanon and Syria withdrew in the first few years while the Dominican Republic, Haiti, Nicaragua and Uruguay acceded in 1949 (Hudec, 1987, p. 23). 3. Argentina, Bahrain, Barbados, Belize, Botswana, Brazil, Burkina Faso, Burma, Cameroon, Costa Rica, Cyprus, the Dominican Republic, Egypt, El Salvador, Fiji, Ghana, Guatemala, Guyana, India, Iran, Israel, Jordan, Kenya, Korean Republic, Kuwait, Liberia, Madagascar, Malawi, Malaysia, Mali, Malta, Mauritius, Mexico, Morocco, Nepal, Nicaragua, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, the Philippines, Senegal, Sierra Leone, Singapore, Sri Lanka, the Sudan, Swaziland, Thailand, Togo, Tunisia, Venezuela, the Yemen Arab Republic, Zaire, Zambia, Zimbabwe. 4. This followed Raul Prebisch’s development theory outlined at UNCTAD I in 1964. 5. For a critical analysis of the import substitution/export orientation dichotomy see Rodrik, 1999 and Page, 1991. 6. The Paul Krugman (1984) variation suggests that where a country produces a variety of differentiated products, closely related in consumer tastes to each other and competing foreign brands, an import barrier will shift demand to locally produced products. Because this is characterized by decreasing costs, a protected home market provides an extra advantage in exporting the same products (R. Caves et al., 1993, p. 225). 7. Bhagwati notes that UNCTAD came to be marginalized and it became ‘commonplace in some quarters to think of UNCTAD as if it were instead UNWASHED and UNKEMPT’ (Bhagwati, 1997, p. 260, emphasis in original). 8. Traditional trading patterns were based on inter-industry trade, following traditional comparative advantage. However, new production methods facilitated intra-industry trade. This meant that both developed and developing countries exported different varieties of the same category of goods or traded the same goods at different stages of fabrication. Intra-industry trade elicited fewer protectionist pressures (UNCTAD T&D, 1989, p. 136).

196 Notes 9. While the incidence of the various shocks varied among developing countries, their sum expressed as a percentage of GNP was broadly similar for the low, medium and high income groupings (UNCTAD T&D, 1985, p. 78). 10. Nontariff barriers include quantitative restrictions, voluntary export restraints, price controls, tariff-type measures such as tariff quotas and monitoring measures (Finger and Olechowski, 1986, pp. 41–2). They also include health and safety standards. 11. The Cairns Group comprised: Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Hungary, Indonesia, Malaysia, Philippines, New Zealand, Thailand and Uruguay. The Hotel de la Paix comprised: Australia, Canada, Hong Kong, Hungary, South Korea, New Zealand, Switzerland, Colombia and Nordic countries. 12. Material power is important in this process, but power in a particular situation is largely constructed by ideas (Wendt, 1999, p. 331). 13. For example, UNCTAD T&D, 1985, 1987, 1988, pp. 76–89, 1990, p. 90; World Bank, 1993a. 14. See for example, GATT BISD, 24S/50, 25S/38, 32S/211, 33S/119; UNCTAD T&D, 1987, p. 152; UNCTAD T&D, 1994, p. 158. 15. Some of the NICs also counterbalanced protection with export subsidies, which had the same effect as a currency devaluation (Caves et al., 1993, p. 205). 16. Moreover, the Lerner symmetry theorem demonstrates that an import tax restricts a nation’s exports just as much as would a direct tax on exports. This is because it is the relative price of exportables in terms of importables that matters. 17. Production distorting subsidies are broadly prohibited under WTO rules. 18. However, the extent to which these countries did embrace market prescriptions and EOI is contested (see, e.g. UNCTAD VII, 1987, p. 130; Rodrik, 1999).

5 Pro-trade Policies: Creating Collective Identity 1. The G24 included: Argentina, Bangladesh, Brazil, Burma, Cameroon, Colombia, Cote d’Ivoire, Cuba, Cyprus, Egypt, Ghana, India, Jamaica, Nicaragua, Nigeria, Pakistan, Peru, Romania, Sri Lanka, Tanzania, Trinidad and Tobago, Uruguay, Yugoslavia and Zaire. 2. Argentina, Brazil, Chile, Colombia, Peru and Uruguay. 3. See for example, GATT BISD, 30S/ 72, 30S/16–17, 33S/123, 32S/197; GATT DOC. MTN.GNG/TRIPS/3, November 18, 1991; GATT/MIN.DEC 86-1572, September 6, 1986; MTN.GNG/NG4/W/10 February 1988. 4. These countries included Burundi, Congo, Gabon, Gambia, Ghana, Guinea, Guinea–Bissau, Madagascar, Mauritania, Mauritius, Mozambique, Niger, Sierra Leone, Somalia, Uganda and Zaire (Ford Foundation Report, 1989, pp. 34, 35). 5. See for example, GATT BISD, 24S/50. 6. See for example, UNCTAD, 1986, p. 11. 7. See for example GATT BISD, 34S/223, 18S/83; UNCTAD, 1972, p. 5. 8. See GATT BISD, 29S/73, 30S/75. 9. See also Anderson, 1996, p. 74; MTN.GNG/NG9/W/3, May 25, 1987.

Notes 197

6 Re-thinking Power in the Trading Regime 1. With respect to cultural selection, culturally determined traits compete for time and attention from their human hosts (Florini, 1996, p. 373). 2. This committee had been formed in 1971 but had never met.

7 India Adopts a New Trading Identity 1. See also WTO Report, 1998, p. 155. 2. In his study of India’s role in the GATT, Patnaik notes that Indian Government documents concerning the early phase of GATT are extremely limited. The Ministry of Commerce did not preserve such documents and the Government had not produced a White Paper. Patnaik conducted extensive interviews with bureaucrats in the Commerce Ministry and negotiating officials, academics and business people. Except for some more academically minded civil servants, many at the middle and lower level were clearly evasive. This was due to the Indian government’s insistence on secrecy concerning foreign trade (Patnaik, 1997, pp. 7–8). This limitation is acknowledged elsewhere (cf. the Report on the Peoples’ Commission on GATT, 1996). However, given that this book concerns the effects of cooperative policies in the international trading regime with respect to roles and relationships, I have principally been concerned with accounts of India’s negotiating position in the GATT and official statements within GATT and UNCTAD forums. 3. From correspondence between the author and the National Centre for Applied Economic Research in 2000. 4. Prior to 1985, the opposition group comprised twenty-four developing countries. The numbers declined throughout the preparatory process as many developing countries supported the Swiss–Colombian proposal for a new round. The G10 included: Argentina, Brazil, Cuba, Egypt, India, Nicaragua, Nigeria, Peru, Tanzania and Yugoslavia. 5. This group included Argentina, Brazil, Chile, China, Colombia, Cuba, Egypt, Nigeria, Pakistan, Peru, Tanzania, Uruguay and Zimbabwe. 6. See for example Ahluwalia et al., 1996; Tendulkar, 1998, p. 282; World Bank, 1996, p. xvii; Joshi and Little, 1996. 7. Correspondence, 2000.

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Index Africa, 6, 94, 105, 108, 125 agency, 33–8, 133–40, 151–4, 187–8 agent reflexive, 9–14, 25–40, 131–51, 162, 187–8 state, 8–11, 34, 71, 116, 145 agricultural products, 50–1, 62–74, 100, 120 liberalization, 118–22, 127, 167 protection, 106, 121, 157, 169, 182–5 anarchy logic of, 10, 17, 26, 31, 43–4 see also neorealism antidumping, 50, 65, 81–6, 127–9, 167, 181 Australia, 109, 111, 122, 186 autonomy, 21–7, 52, 77, 140 compare interdependence Barshevsky, Charlene, 5 Bhagwati, Jagdish, 174, 179 bourgeois class, 11, 21–3 see also Gramscian neo-Marxism and World Systems Theory Brazil, 7, 83, 118–30, 144, 167, 173–9 Cairns Group, 5, 69, 109, 121, 124 Canada, 70, 80–4, 94, 109, 122, 130 change behavioral, 13, 16, 116, 137 constitutive, 8, 13, 33–40, 190 cultural, 35–40, 131–2, 154–60, 179–86 identity, 10–13, 116–32, 179–86 positional, 34, 191 regime, 17–40, 69–78, 95–134, 161 revolutionary, 28, 30, 39, 69 structural, 38, 39, 79, 170 subjective, 38–9, 107–15 Checkel, Jeffrey, 24 coercion, 18–20, 43, 154–63, 174, 188–9

collective identity, 10–12, 36, 131–2, 150–4 common fate, 39, 55, 106–8, 129 consensus, 53, 65, 130 constructivism, 33–40, 95–7, 133–5 core, 21–8, 31–2 compare periphery and semiperiphery countervailing duties, 50, 81, 167, 181 Cox, Robert, 22, 28, 29, 31, 58 see also Gramscian neo-Marxism Croome, John, 74, 103, 118 cultural selection, 33–40, 134–9 development theory, 3, 59, 99, 158, 163 discourse, 35–9, 151–2 development, 35–40, 58–63, 99–100, 163–7 neo-classical economics, 56, 76–7, 110–17, 175–80 disembedded liberalism, 46–7, 60–3, 109–16, 124–9, 146–60, 175–80 dispute settlement, 52–4, 63–7, 91, 130–2, 158–9 Dunkel, Arthur, 74, 75 East Asia, 105–8, 136, 172–3 embedded liberalism, 47–54, 76–9, 97–103, 117–24, 163 compare disembedded liberalism environmental activism, 135, 140–7, 158 protectionism, 787–93, 135–60 epistemic communities, 12, 39, 96, 115, 138, 149 exemptions, 51–60, 91–3, 97, 129, 143–8 see also preferential treatment export oriented industrialization (EOI), 42, 59, 112, 171–3 Florini, Ann, 133–9 see also norms, reproduction, 133–9 215

216 Index Ford Foundation report, 33, 117, 122, 125 Gandhi, Indira, 166, 175 Rajiv, 166, 175 GATT, secretariat, 83, 112, 166 General Agreement on Trade in Services (GATS), 41, 76 Generalized System of Preferences (GSP), 51, 101, 128 Giddens, Anthony, 66 Gill, Stephen, 28–9 Gilpin, Robert, 18, 24, 27, 69 globalization, 56–8, 127, 146 Goldstein, Judith, 76 Gramscian neo-Marxism, 21–33, 69, 72, 77, 161, 187–91 Group on Environmental Measures, 148, 156 Group of 77 (G77), 31, 101–9, 121, 166, 179 Group of 24 (G24), 120 Gunder Frank, Andre, 213 hegemony, 17–32, 80–4, 94 hegemonic stability theory (HST), 17–18, 24–30, 69, 72, 135, 161, 189–91 homogeneity, 39, 56, 95, 113–15, 124–6, 138, 174 Hudec, Robert, 98 ideas, 36–40, 43–67, 99–100, 124–8, 134–60 identity collective, 39–40, 116–20, 131–2 egoistic, 10–12, 72, 131–3, 161–2 formation, 37–40, 94–103, 116–32 ideology, 28, 29, 188 imitation, 37, 38, 117, 137, 151, 178 imperialism, 29, 36, 43–6, 52, 143 see also mercantilism, 36, 43, 44, 45, 83, 84 import substitution industrialization (ISI), 59–60, 99, 165–177 India, 161–187 foreign exchange crisis, 170–6 state-led industrialization, 77, 163–6, 174 trade reform, 171–86

infant industry, protectionism, 3, 7, 98, 113, 163–8 influence, 32, 38, 39, 60, 63–64, 73, 78, 134 distribution of, 33, 40–5, 62–7, 121, 132, 154, 182 instrumental reason, 97, 116–17, 189 see also power interaction, 131–2, 187–91 interdependence, 55–60, 96–112, 119–21 interests, constructed, 9, 15, 25, 34–40, 131–2, 164, 186 pre-formed, 9–11, 17–21, 187–9 intra-industry trade, 56–7, 104, 172 Katzenstein, Peter, 19 Keohane, Robert, 19–20, 24, 73 and Nye, Joseph, 73 Krasner, Stephen, 17, 27, 31–2, 69, 72–4 labor standards, 51, 61, 131–6, 152, 182–3 Latin America, 106, 108 learning, behavioural, 20, 25, 33, 97–8 complex, 37, 97, 132–7, 154, 162 Least Developed Countries, 6, 122, 128 legalism, 63–7, 120, 128–31, 180–4 see also rules-based regime legitimacy, 27, 64–5, 82–9, 110–15, 134, 145, 150–4 Leutwiler Report, 112, 120, 173 leverage, 33, 103, 123–4, 128 liberalization, multilateral, 42–61, 65–9, 78–80, 116–32 unilateral, 3–5, 124–5 Mahalanobis, model of economic development, 163 Marine Mammal Protection Act, 79, 90, 91 Marrakesh Agreement, 155–6, 184–5 material, conditions, 38–40, 32, 96 power, 17–35, 52–4, 63–7, 115, 134 Mexico, 143 Montreal Mid-term Review, 121, 180

Index 217 Most Favored Nation (MFN), 48–51, 83, 92, 99–109, 125–7, 142 Multifibre Arrangement (MFA), 53, 62, 101, 127, 129, 170, 182 multilateralism … deep, 12, 42–6, 65, 92 limited, 42–6, 50–5 super(lateralism), 42–6, 65–7, 131–3, 154–60, 185–6 multilateral trader, 42, 92, 124, 148–50, 163–7 compare protectionist Other see also reciprocal trader

positional states, 26, 34, 191 power, 24–40, 52–60, 126, 129, 133, 134, 135–7, 160 preferential treatment, 97, 101, 115, 166 procedural rules, 52–4, 63–5, 128–31 protectionism, environmental, 61, 64, 87–93, 135–60, 189 protectionist Other, 3–10, 55, 97, 167 pro-trade policies, 116–32, 134, 170–86 Punta del Este, 123, 168

Nader, Ralph, 88 national treatment, 48, 59, 142–3 nation-building, 29, 51, 99, 103, 113 neoclassical economics, 42–5, 50, 58–61, 112, 145–60 neoliberalism, 18–33, 69–73, 116, 187–91 neorealism, 17–33, 69–73, 116, 187–91 New International Economic Order (NIEO), 3, 31, 100, 102, 163 see also development theory Newly Industrialized Countries (NICs), 60, 102, 124 non-government organizations (NGOs), 136, 140–5, 159 non tariff barriers (NTBs), 50–66, 102–11, 118, 127–32, 140, 167 see also voluntary export restraints see also phytosanitary measures normative tiers, 43–67, 124–32 norm(s) constitutive, 88, 190 cultural, 54–60, 65–7, 131–2 entrepreneur, 137 procedural, see procedural rules regulatory, 9, 40, 44 see also social rules North Atlantic Free Trade Agreement (NAFTA), 94, 136, 146

quantitative trade restrictions, 50–2, 84–91, 101–8, 154, 175–86

objective change, 38, 105–9, 160 compare subjective change Onuf, Nicholas, 34, 43, 134 periphery, 23–7, 72, 303 phytosanitary measures, 63, 159

Rao, 176, 178 reciprocal trader, 10–3, 55, 97, 167 reciprocity, 42, 51, 124–32 regime change, 25–40, 60–7, 116, 124–32, 133–8, 160 representational practices, 117, 124, 133, 189 Reus-Smit, Christian, 34 Ricupero, Rubens, 6, 121–3 role reversal, 117, 124–35, 186 Ruggie, John Gerard, 7, 47 Ruggiero, Renato, 64 rules-based regime, 63–5, 70, 77, 116, 128–31, 147, 179, 184 self-help, 17 semi-periphery, 23, 25, 31 compare periphery self restraint, 63–5, 128–31 services, 62–6, 74–6 Singh, Manmohan, 176 socialization, 10, 190–1 social learning, 38, 97–8, 117, 132–7, 162 social rules, 44–51, 61–3, 71, 137–9, 148 state-society relations, 44–52, 60–3, 124–8 subjective change, 38, 105–6, 160 super, 82, 83, 93, 301 superlateralism, 65–7, 131–3, 154–60 see also deep multilateralism

218 Index superstructure, 17, 22–31, 40, 72 suppliant, 12, 100, 167, 186 structuration, 9, 34, 39, 40 structure, 9–11, 21–6, 31–40, 44, 67, 134, 186–91 see also agent, agency tariffs, 49–50, 62, 83, 102–15, 125, 178, 185 textiles, 52–64, 101–9, 167, 181–2 Third World, 99, 118–20, 170–4 Tokyo Round, 74, 101, 118, 122 Trade Policy Review Mechanism (TPRM), 168–72, 180–5 Transnational Corporations (TNCs), 119, 169 see also transnational capital, 11, 25, 30, 77, 79 tuna-dolphin dispute, 87–93 UNCTAD (United Nations Conference on Trade and Development), 114, 128

unfair trade, 82–6 unilateralism, 79–93 United States (US), environmental protectionism, 87–93, 140–8 trade policies, 68–93, 121–4 USTR (United States Trade Representative), 82, 83, 86 voluntary export restraints (VERs), 50–66, 70, 81–7, 101, 127–9, 170 waivers, 121, 164–9, 179–80 Wallerstein, Immanuel, 23 Waltz, Kenneth, 17, 34 welfare state, 47–52, 61, 76, 112 Wendt, Alexander, 9, 36, 38, 95, 133, 187–91 World Systems Theory, 21–33, 69, 77, 188