Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-27T09:49:24.523Z Has data issue: false hasContentIssue false
  • English
  • Français

The East European countries and GATT: the role of realism, mercantilism, and regime theory in explaining East-West trade negotiations

Published online by Cambridge University Press:  22 May 2009

Leah Haus
Leah Haus
Affiliation:
Assistant Professor of Politics at New York University, New York.
Get access

Abstract

The international political economy literature on regimes has focused on relations among the industrialized Western countries. Despite the increasing participation of East European countries in international economic organizations, the literature has neglected the subject of East–West economic relations. To redress this void in the literature, this article assesses the extent to which and the conditions under which realism, mercantilism, and regime theory help explain the Western positions toward negotiations between East European countries and the General Agreement on Tariffs and Trade (GATT). It argues that a thorough explanation requires drawing on insights from all three modes of analysis: realism provides a useful starting point and sets the context, while mercantilism and regime theory enrich the explanation in circumstances in which political issues concerning security subside and trade policy issues surface.

Type
Articles
Information
International Organization , Volume 45 , Issue 2 , Spring 1991 , pp. 163 - 182
Copyright
Copyright © The IO Foundation 1991

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

An earlier version of this article was presented at the 1989 annual meeting of the American Political Science Association. For helpful comments on various drafts, I thank Robert Keohane, Robert Art, Stephen Krasner, Wolfgang Reinicke, Virginia Turner, and two anonymous reviewers for IO.

1. For a detailed explanation of the negotiations regarding the reconstruction of the postwar international economic order, see the classic work by Gardner, Richard N., Sterling-Dollar Diplomacy in Current Perspective: The Origins and the Prospects of Our International Economic Order, expanded ed. (New York: Columbia University Press, 1980)Google Scholar.

2. Czechoslovakia was an original signatory to GATT and did not have a planned economic system at the time. Despite its change in economic system, it has remained a member of GATT.

3. For a notable exception to this general oversight in the field of international political economy, see Jacobson, Harold K. and Oksenberg, Michel, China's Participation in the IMF, the World Bank, and GATT: Toward a Global Economic Order (Ann Arbor: University of Michigan Press, 1990)CrossRefGoogle Scholar.

4. See Gilpin, Robert, “The Richness of the Tradition of Political Realism,” in Keohane, Robert O., ed., Neorealism and Its Critics (New York: Columbia University Press, 1986), pp. 301–21Google Scholar; and Keohane, Robert O., “Theory of World Politics: Structural Realism and Beyond,” in Keohane, , Neorealism and Its Critics, pp. 158–203Google Scholar.

5. Krasner succinctly described the relationship between realism and mercantilism when he stated that the mercantilists “brought Machiavelli from the political to the economic arena.” See Krasner, Stephen D., Defending the National Interest: Raw Materials Investments and U.S. Foreign Policy (Princeton, N.J.: Princeton University Press, 1978), pp. 37–38Google Scholar.

6. Heckscher, Eli F., Mercantilism, vol. 2 (London: Allen & Unwin, 1934), p. 15Google Scholar.

7. Viner, Jacob, “Power Versus Plenty as Objectives of Foreign Policy in the Seventeenth and Eighteenth Centuries,” World Politics 1 (10 1948), p. 10CrossRefGoogle Scholar.

8. According to Heckscher, “The ideas were based on a static conception of economic life: the view that there was a fixed quantity of economic resources in the world, which could be increased in one country only at the expense of another.” See Heckscher, , Mercantilism, vol. 2, p. 24Google Scholar.

9. See Gilpin, Robert, “Economic Interdependence and National Security in Historical Perspective,” in Knorr, Klaus and Trager, Frank N., eds., Economic Issues and National Security (Lawrence: University Press of Kansas, 1977), pp. 19–66Google Scholar; and Gilpin, Robert, The Political Economy of International Relations (Princeton, N.J.: Princeton University Press, 1987), pp. 31–34CrossRefGoogle Scholar.

10. Krasner, Stephen D., “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” in Krasner, Stephen D., ed., International Regimes (Ithaca, N.Y.: Cornell University Press, 1983), p. 1Google Scholar.

11. Keohane, Robert O., After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, N.J.: Princeton University Press, 1984), p. 59Google Scholar.

12. Ibid., p. 99.

13. Ibid., pp. 89–92 and 103–6.

14. According to Article 33 of GATT, “A government…may accede to this Agreement …on terms to be agreed between such government and the contracting parties. Decisions of the contracting parties under this paragraph shall be taken by a two-thirds majority. “In practice, applicants have conventionally been required to grant tariff concessions in reciprocation for the benefits of GATT membership. In addition, contracting parties have increasingly addressed the issue of nontariff elements of the various applicants' trade policies. See Long, Olivier, Law and Its Limitations in the GATT Multilateral Trade System (Dordrecht, Netherlands: Martinus Nijhoff, 1985), pp. 36–40Google Scholar. For more thorough accounts of past attempts to bridge the systemic gap and to devise a rule to ensure meaningful reciprocity between countries with nonmarket economic systems and those with market systems, see Domke, Martin and Hazard, John N., “State Trading and the Most-Favored-Nation Clause,” American Journal of International Law 52 (01 1958), pp. 55–68CrossRefGoogle Scholar; Gerschenkron, Alexander, “Russia and the International Trade Organization,” American Economic Review 37 (05 1947), pp. 624–48Google Scholar; Hewett, Edward A., “Most-Favored-Nation Treatment in Trade Under Central Planning,” Slavic Review 37 (03 1978), pp. 25–39CrossRefGoogle Scholar; and Viner, Jacob, “Conflicts of Principle in Drafting a Trade Charter,” Foreign Affairs 25 (07 1947), pp. 612–28CrossRefGoogle Scholar.

15. In this article, I employ data derived from extensive interviews that I conducted between January 1986 and August 1990 with numerous former and current officials. Most of the interviews were with former and current officials from the European Community (the Commission, France, Germany, the Netherlands, and the United Kingdom), the GATT Secretariat, Hungary, Poland, and the United States (Commerce Department, Office of the U.S. Trade Representative, and State Department). The interviews, which were undertaken in conjunction with a larger study, were primarily conducted in Brussels, Budapest, Geneva, and Washington and were granted on the condition that I preserve the anonymity of the officials interviewed. In most cases, I was able to cross-check the material with at least three different former or current officials. In cases in which this was not possible, I have either omitted the material or introduced it with the words “apparently” or “it seems.” I have also relied on written documents to which 1 was granted access. Many U.S. documents were obtained through the Freedom of Information Act, which enabled me to quote them more extensively than documents obtained from West European sources. The interviews employed in this article are numbered, while the written documents are cited as U.S. notes, EC notes, and GATT documents.

16. Interviews 2, 8, 10, 18, 61, 72, 87, 88, 91, 98, and 100; and EC note, 23 November 1979.

17. Interview 61.

18. Interview 72.

19. Interview 100.

20. U.S. note, 19 January 1967.

21. Interviews 11, 33, 36, 37, 40, 76, 78, and 79; and EC note, 23 November 1979. Western policymakers often changed, evaded, or ignored the GATT conventions in order to block the applications of Bulgaria as well as the Soviet Union. For example, one convention followed throughout the history of GATT was to grant nations the status of less developed countries (LDC) on a self-selection basis. When Bulgaria claimed LDC status and requested that its application for GATT membership be considered accordingly, the United States and the EC countries refused to recognize Bulgaria as an LDC, despite the fact that Norway and others did.

22. Interviews 26, 40, 64, 78, and 132. It was not possible to determine whether the review of criteria for obtaining observer status was initially established in order to bar the Soviet Union. However, the desire to bar the Soviet Union from obtaining observer status came to dominate the West's position toward the review and led to the subsequent decision to grant no further requests until completion of the review.

23. Interviews 28, 29, 36, 37, 42, 78, and 127.

24. For example, in August 1986, the White House spokesman announced U.S. opposition to the Soviet request on the basis that Moscow's “state-supported and controlled economic system” is incompatible with GATT trade rules. See The New York Times, 24 August 1986, section 4, p. 2.

25. Interview 104. See also Chapman, Margaret, ed., Proceedings of an International Conference on “USSR Participation in the General Agreement on Tariffs and Trade (GATT)” (Washington, D.C.: American Committee on U.S.-Soviet Relations, 1989), pp. 19–20Google Scholar; and Richter, William L., “Soviet ‘Participation’ in GATT: A Case for Accession,” New York University Journal of International Law and Politics 20 (Winter 1988), pp. 497–98Google Scholar.

26. Interviews, 1, 2, 17, 26, 36, 78, 95, 113, 120, and 124. The particular fear of “UNCTADization” was expressed in an internal U.S. document written in the early autumn of 1986: “USSR participation, even as an observer, would bring an undesirable political element into GATT deliberations. GATT Council and Contracting Party session observers may attend nearly every GATT meeting, and are allowed to speak when acknowledged by the meeting chairman. As an observer, the USSR could be expected to use these meetings to criticize U.S. actions, pursue other political ends, and to attempt to influence the behavior of other NMES [nonmarket economies]. It is likely that they would attempt to insert East-West issues into these fora, and to support LDC complaints against developed countries that could encourage the UNCTADization of the GATT. In addition, their presence could be expected to restrict the freedom of expression and participation in GATT work of Eastern Bloc CPS [contracting parties] such as Hungary and Romania.”

27. Interview 95.

28. The Japanese officials responsible for bilateral relations with the Soviet Union were apparently actively involved in the issue of Soviet observer status and were strongly influenced by security interests and Japan's unresolved territorial dispute with the Soviet Union. The United States initially favored granting observer status, but only after the conclusion of the Uruguay Round. This position apparently reflected a compromise between the conflicting positions advocated by different departments within the U.S. government. The United States changed its position relatively quickly when the consensus in GATT forced American officials to consider the issue more carefully. The EC adopted a more positive approach than either Japan or the United States. Its position was apparently indirectly influenced by the broader changes in the EC's bilateral relations with the East, as signaled by the conclusion of the EC-CMEA Joint Declaration. The Soviet Union had clearly abandoned its position of hostility toward the EC and concluded a bilateral trade and cooperation agreement with the EC in December 1989. The EC therefore apparently felt that the Soviets “should be paid back.” Interviews 131, 132, 133, 136, 137, 141, 142, and 143.

29. For a detailed analysis of China's negotiations with GATT, see Jacobson and Oksenberg, China's Participation in the IMF, the World Bank, and GATT, chap. 4.

30. Interviews 2, 8, 17, 26, 36, 71, 83, 93, 95, 100, and 113.

31. Interviews 100, 102, and 103.

32. Interview 102.

33. Interview 105.

34. U.S. note, 1 March 1967.

35. U.S. note, 17 April 1967.

36. U.S. notes, 23 March 1967, 20 April 1967, and 6 June 1967.

37. Interviews 91, 98, and 108. The EC members' aggravation with the American stance was heightened by the fact that the United States would not be legally bound by any agreement between Romania and GATT or between Hungary and GATT. Because the 1962 Trade Agreements Expansion Act enacted by the U.S. legislature prohibited the granting of MFN status to a “communist country,” the United States could not adhere to Article I of GATT and would thus invoke Article 35 of GATT and be exempted from the “rights and obligations” of the multilateral agreement. It did not do this in the case of Poland, however, because Poland had been previously exempted from the terms of the 1962 Trade Agreements Expansion Act.

38. Interviews 29, 30, 38, 100, 118, and 123.

39. Interviews 4, 5, 23, 28, 88, 96, 100, 110, and 120.

40. Pinder, John and Pinder, Pauline, The European Community's Policy Towards Eastern Europe (London: Chatham House, 1975), p. 19Google Scholar.

41. This problem has been recognized. See Keohane, , After Hegemony, p. 73Google Scholar.

42. U.S. note, 1 March 1967.

43. Interview 72.

44. Interviews 8, 38, 64, 72, 87, and 91; EC note, 5 March 1970; and GATT document Spec (70) 83. The Hungarian request was granted, and tariff concessions were accepted as a legitimate entrance fee to GATT.

45. Interview 91.

46. In 1970, trade with Poland, Romania, and Hungary accounted for 0.34 percent of total U.S. trade and 1.26 percent of total EC trade. See International Monetary Fund, Direction of Trade Annual: 1968–1972 (Washington, D.C.: International Monetary Fund, 1973)Google Scholar.

47. The clause relating to QRs in the Hungarian protocol of accession states the following: “(a) Contracting parties still maintaining prohibitions or quantitative restrictions not consistent with Article 13 of the General Agreement on imports from Hungary shall not increase the discriminatory element in these restrictions and undertake to remove them progressively, (b) If, for exceptional reasons, any such prohibitions or restrictions are still in force as of 1 January 1975, the Working Party provided for in paragraph 6 will examine them with a view to their elimination, (c) To this end, contracting parties shall notify, on entry into force of this Protocol, on I January 1975, and thereafter before the consultations provided for in paragraph 6 below, discriminatory prohibitions and quantitative restrictions still applied to imports from Hungary. Such notifications shall include a list of the products subject to these prohibitions and restrictions, specifying the type of restrictions applied (import quotas, licensing systems, embargoes, etc.) as well as the value of trade effected in the products concerned and the measures adopted with a view to eliminating these prohibitions and restrictions under the terms of the preceding sub-paragraphs.”

48. GATT documents L/4228, L/4633, L/4930, L/5303, L/5635, and L/5977.

49. The dispute between Hungary and the EC was eventually resolved in the context of the bilateral trade and cooperation agreement that was initialed in June 1988. The agreement provided for a three-stage removal of discriminatory QRs, with those against “nonsensitive products,” “fairly sensitive products,” and “highly sensitive products” to be eliminated by 1989, 1992, and 1995, respectively. The agreement also included a special safeguard clause providing an accelerated procedure for restricting imports of “highly sensitive products” between 1995 and 1998. Subsequent to the signing of the agreement, the EC removed all discriminatory QRs applied against products from Hungary and Poland in the context of the Group of 24's program of aid for economic reform in the two countries.

50. Interviews 39, 61, 92, and 93. Although the Commission was responsible for defending the EC, quite a few Commission officials were less than sympathetic to the EC position. Furthermore, the Commission was itself involved in a general dispute with the EC member states over the competence to determine trade policy with Eastern Europe. Some Commission officials were thus also interested in abolishing the national QRs (or developing a harmonized list of QRs) in order to establish a unified commercial policy.

51. Interview 93.

52. Interviews 99, 103, 105, and 107.

53. Interview 99.

54. Interview 112.

55. Interviews 40, 72, 83, 112, 113, and 123.

56. Although many products were covered by the discriminatory QRs, at least 20 percent of these products were not produced in Hungary and therefore had no effect on Hungarian trade. See Martonyi, Janos, “East European Countries and GATT,” in Maresceau, Marc, ed., The Political and Legal Framework of Trade Relations Between the European Community and Eastern Europe (Norwell, Mass.: Kluwer, 1989), p. 282Google Scholar. From 4 to 6.5 percent of Hungarian exports to the EC in 1985 were affected by QRs. See GATT document L/5977, pp. 3 and 6. QRs against “nonsensitive products” covered approximately 379 NIMEXE codes when the EC-Hungarian bilateral trade and cooperation agreement was concluded in 1988. See Annex A in “Agreement Between the European Economic Community and the Hungarian People's Republic on Trade and Commercial and Economic Cooperation,” 30 11 1988, L/327, Official Journal of the European Communities, vol. 31Google Scholar. In the case of Hungarian exports, the Common Agricultural Policy posed more substantive barriers than QRs posed.