A Sample Research Proposal
Formation of Post WWII International Trade Regime:
A Second Image Explanation
The Puzzle
Although the GATT is the basis of the international trade regime, it remains a little known fact that American officials originally desired a far more comprehensive and liberal regime, which was to be embodied in a Charter for an International Trade Organization (ITO). Indeed, the GATT was never intended to spine the postwar trade order. As Kenneth Dam explains, this agreement was “designed to record the results of a tariff conference that was envisioned at the time as being the first of a number of such conferences to be conducted under the auspices of the International Trade Organization.”[1]
This presents a puzzle to students of international affairs because, although the United States was the undisputed hegemon at the end of World War II, it did not successfully construct the trade regime it originally desired. The more liberal ITO was not passed and the GATT exemplified what John Ruggie calls the postwar “compromise of embedded liberalism,” meaning that “unlike the economic nationalism of the thirties, it would be multilateral in character; unlike the liberalism of the gold standard and free trade, its multilateralism would be predicted upon domestic interventionism.”[2]
This paper will attempt to answer the question of why the United States, even though it was most powerful nation after the war, could not achieve the trade regime it originally desired. What variables might explain why, even though its relative power remained constant, the US failed in its attempt to construct one regime, but ended up with another more diluted regime?
This question is relevant to international relations because it can help us to understand the process of regime formation. The formation of international regimes is a crucial area of study in the international relations literature because, like other institutions, regimes rise and fall over time. It is important to consider when, and under what conditions regimes will emerge. This analysis of the formation of the trade regime will attempt to increase our understanding of these issues.
Alternative Explanations
Existing explanations are inadequate in understanding the formation of regimes, including the formation of the trade regime. The two explanations of regime formation which prevail in the international relations literature are the structural theory of hegemonic stability and the functional theory (i.e., neoliberalism) elaborated by Robert Keohane in his book After Hegemony.
Hegemonic stability theory links the existence of a dominant power, a structural condition in the international system, to the creation of stable, liberal regimes. It suggests that the postwar settlement, embodied in the GATT, was an expression of the prevailing distribution of power and interests after the war. In its broadest sense, the GATT did reflect the interests and dominant position of the United States after the war. The structural variables are sufficient if we are attempting to account for the fact that the postwar system was open rather than closed.
However, as argued above, the structural explanation has difficulty in explaining the specific contents of the regime. It cannot explain why the United States did not achieve the formation of the more comprehensive and liberal ITO which State Department officials steadfastly pursued up until 1950.
The functional explanation of regime formation de-emphasizes the importance of structural conditions in the international system and argues that shared economic interests create a demand for shared international rules and regime. Because of the nature of interdependence, states will realize that is in their best interests to pursue cooperation and will demand regimes.
Though the functional explanation attempts to locate sources of state behavior other than national power, like hegemonic stability theory, it ignores the central insight of interdependence theorists: foreign policy is intimately related to domestic politics. The problem with both theories of regime formation is that they are systemic, meaning they assume unified state actors pursuing a singular national interest determined by their positions in the international system. Thus, neither theory is sufficient in explaining the conditions under which states will pursue cooperation by forming regimes.
In order to fully understand regime dynamics, one must understand the domestic politics of the leading states involved in the regime negotiations. As John Ikenberry notes, theories of international cooperation can benefit from opening the black box of domestic politics, for “a systematic understanding of the institutional position of state officials reveals the variety of constraints upon and incentives for participation in international regime agreements.”[3]
Surprisingly, the literature on regime formation has generally neglected the domestic sources of regime formation. Haggard and Simmons explain:
More broadly, there have been few studies of the domestic political
determinants of international cooperation. There are both methodological
and theoretical reasons to open the black box of domestic politics. Even if
one adopts a structural explanation of compliance and defection, validating
such claims demands careful reconstruction of decision-making at the national
level. But the neglect of the domestic political and economic realm has had
deeper costs, including a neglect of the substantive issues over which states
are likely to seek cooperation and the basic forces leading to regime change.[4]
International political economists have identified many unit-level variables which might be relevant in explaining the failure of the ITO and formation of GATT in the postwar world. The two which seem most interesting emphasize the role of interest groups and state officials.
Interest group theory explains foreign economic policy by looking at the ongoing struggle for influence among domestic groups. Because much interest group theory ignores the role of the state, other theorists have suggested focusing on the role of the state – as both a structure and an actor – in shaping the extent to which social forces exert influence on foreign policy. Thus, in analyzing the influence of domestic politics on regime formation, it is necessary to look at the bargaining between state officials and interest groups. Indeed, it is useful to conceptualize the formation of the trade regime as “two-level game,” as Robert Putnam suggests, and examine the bargains negotiators made at the domestic table which later influenced the chances for success at the international table. Preliminary research into my case suggests the necessity of looking at the influence of agricultural groups on State Department negotiators, and how their demands for escape clauses for agricultural goods compromised their negotiating flexibility with other states.
The Test
This paper will test the causal role of second-image variables in understanding the formation of the postwar trade regime. My dependent variable is regime formation and my puzzle (why one set of rules – ITO – was rejected and the other – GATT – accepted) stems from variance in this dependent variable. I test second-image independent variables by holding the structural variable (distribution of power in international system) constant. The period between 1945 and 1950, when the ITO was rejected and the GATT accepted, did not witness a change in America’s relative power. I then test the impact of domestic political variables. The two independent variables I am most interested in are interest group activity and state official negotiating response. I measure interest group activity by looking at public statements of groups, such as their testimonies in Congressional hearings over these trade agreements. I will also look at lobbying activities and resources devoted to influencing state policy vis-à-vis the GATT and ITO. The response and negotiating strategy of state officials can be measured directly.
The GATT negotiations and ITO negotiations exhibited different levels of interest group activity. That is, there exists variance in this independent variable. The GATT, which was signed in 1947 during the Prepatory Committee meetings for the ITO, was intended as an advance installment of the Charter. American negotiators, aware that the ITO might take years to complete, negotiated the GATT as a stopgap measure to provide order to the trading system in the interim. Business groups and agricultural interests did not campaign vigorously against the document, even though there were clauses in the document which were antithetical to their interests, because they did not perceive the GATT to be a permanent mechanism for the formal control of all aspects of trade. That they did not perceive its permanence was partly a result of State Department negotiating strategy, for they framed the GATT as “trade agreement” within the bounds of the Reciprocal Trade Agreement Act, and not as an international regime, in order to quickly pass the agreement. In contrast, the ITO negotiations were stalled by a constant appeal and consultation with agricultural and business groups, who perceived the ITO as being a significant threat to their interests.
Although this study appears to use a single case, because I am examining two separate outcomes (ITO rejected and GATT accepted), it is a comparative case study. Although I have a sense that interest group activity was important to each outcome, I hope to examine the exact nature of interest group influence on the GATT and ITO negotiations – how and in what ways did interest group activity bind the hands of State Department negotiators, thereby affecting the outcomes of the negotiations?
The case study permits two types of tests of covariation—across time and across groups. I can examine how domestic political bargaining affected the outcomes in 1947, when the GATT was signed, and in 1950, when the plans for the ITO were tabled. I can also look at how the positions and strategies of different groups – agriculture, business – each affected the outcomes in each case.
Studying the domestic politics of the negotiations of the ITO and GATT will enhance our understanding of the process of regime formation. Prevalent theories of regime formation ignore domestic political variables. By examining the domestic politics in the United States, a state critical to the formation of the postwar trade regime, I hope to enrich our knowledge of how domestic political variables influence the process of regime formation.
Bibliography here
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[1] Kenneth Dam, The GATT—Law and International Economic Organization (Chicago: University of Chicago Press, 1970), p.11.
[2] John Ruggie, “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order,” in Stephen Krasner, ed., International Regimes ( Ithaca: Cornell University Press, 1983), p.209.
[3] John Ikenberry, “An Institutional Approach to American Foreign Economic Policy,” in John Ikenberry, Mike Mastanduno, and David Lake, Eds. The State and American Foreign Economic Policy (Ithaca: Cornell University Press, 1988), p.242.
[4] Stephen Haggard and Beth Simmons, “Theories of International Regimes, “International Organization 41 (Summer 1987), p.513.