Introduction Symposium: The Political Economy of International Trade Law and Policy
Introduction Symposium: The Political Economy of International Trade Law and Policy
Kenneth W. Abbott 0
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As this Introduction is written, the law of international trade stands
at a major crossroads. In Congress, the House of Representatives and
the Senate are attempting to consolidate two massive omnibus trade
bills.' These bills authorize the President to enter into a new round of
multilateral trade negotiations, amend the import relief laws, prescribe
measures to deal with "unfair" foreign trade practices, and in general
affect virtually every area of United States law concerned with
international trade. Provisions like the Gephardt Amendment,2 designed to
exert pressure on countries which have large trade surpluses and engage in
trade practices that the United States considers unreasonable, have been
criticized as "mean-spirited" 3 and protectionist, although the reality is
considerably more complex.
* Professor of Law, Northwestern University School of Law. J.D. Harvard Law School, 1969.
H.R. 3, 100th Cong., 1st Sess., House version passed Apr. 30, 1987 [hereinafter H.R. 3, House
version], Senate version passed July 23, 1987.
2 H.R. 3, House version, supra note 1, § 126.
3 See, eg., 133 CONG. REC. H2781-82 (daily ed. April 2
)(remarks of Rep. Frenzel).
In Geneva, the contracting parties of the General Agreement on
Tariffs and Trade ("GATT") have begun the Uruguay Round of trade
negotiations.4 Like the Tokyo Round in the 1970s, these negotiations
will address such issues as tariffs, non-tariff barriers to trade, the role of
developing nations, and the functioning of the GATT institutions.' The
Uruguay Round will also attempt to extend at least a framework of
GATT principles to entirely new areas of economic activity, including
trade in services and intellectual property.6 Yet the negotiations opened
against a background of acrimonious disputes among the major trading
nations over allegedly protectionist actions, and such disputes seem likely
to continue7 in spite of the "standstill and rollback" agreement adopted
at the outset of the Round.8
The lawyer who seeks to understand these sweeping developments
cannot be content with the positivistic descriptions of statutes and
agreements that occupy so prominent a place in today's law reviews; far less
content can the lawyer who seeks to participate in the evolution of
international trade law by advocating particular policies. In each case, the
attorney requires a deeper understanding of the political and economic
forces, ideas, and institutions that shape trade law and policy.
The Northwestern Journal of International Law & Business has
designed this symposium on the political economy of international trade
law and policy to help meet the need for deeper insights. The symposium
includes contributions by Professor Edward John Ray, an economist,
and by Professor Judith Goldstein, a political scientist, and Michael
Borrus, a lawyer engaged in the study of trade policy. The Journal sought
articles that would perform three functions: 1) introduce international
lawyers to some of the major theories of trade policy currently accepted
in other intellectual disciplines; 2) provide ample citations to additional
theoretical and empirical works; and 3) argue a specific thesis relevant to
the current trade policy debate. The works presented here fulfill all of
these goals. In this Introduction, I will attempt only to summarize,
compare, and place in context the theories which the authors themselves
4 See Ministerial Declaration on the Uruguay Round, Sept. 20, 1986, reprintedin GENERAL
AGREEMENT ON TARIFFS AND TRADE, BASIC INSTRUMENTS AND SELECTED DOCUMENTS, 33d
Supp. at 1
)[hereinafter Ministerial Declaration].
5 See Ministerial Declaration, supra note 4, pt. I.
6 See id. pt. I(D), pt. II.
7 For a recent example of a protectionist act taken in retaliation for alleged foreign
protectionism, see N.Y. Times, Dec. 18, 1987, at 1, 33, col. 1 (Midwest ed.) (congressional vote to prohibit
Japanese firms from participating in certain public works projects).
8 See Ministerial Declaration, supra note 4, pt. I(C).
There are two general theoretical approaches to the analysis of trade
policy, or foreign policy more generally. The first focuses on the external
position of the state usually seen as a rational political unit vis-a-vis other
states interested in a particular issue.9 Thus, for example, some theorists
argue that a state that is economically and politically predominant, like
the United States after World War II, will prefer an open world economy
and will have the power to create rules and institutions supporting such a
system. Without a predominant state, however, the political cooperation
necessary to create an open trade regime will be very difficult to obtain. 10
The second theoretical approach focuses on the domestic political
processes of the state. Under this approach, it is important to note, a
state will not necessarily be seen as acting rationally in its own interest.II
The articles in this symposium are both of the second school,
although echoes of the first can sometimes be heard, as in Borrus and
Goldstein's discussions of declining United States power and
competitiveness.12 Both Articles focus, moreover, on the politics of the United
States. Yet the two works analyze similar political phenomena in quite
different ways, and in that respect are valuable complements.
Professor Ray advances an analytical framework designed to
comprehend the many factors influencing a nation's trade policy. His model
is very instructive, as it is an amalgam of two conflicting theories of the
domestic political process. 13 On one side, "micro" theories hold that
trade policy simply reflects the net result of political conflict among
interest groups contending over the potential gains from free trade or
protection.' 4 A variety of economic factors, outlined by Ray, determines the
interests and relative strength of these groups, and thus influences the
outcome of the conflict at different times. Most micro theories detect a
continuing bias in favor of protection, however, since consumers-the
natural opponents of protection-are among the interests least able to
organize and influence the political process. 5 According to Ray, micro
theories can also help explain the nature of the measures used to provide
protection, particularly the growing popularity of non-tariff barriers; this
is an area deserving of further research. 6
On the other side, "macro" theories hold that government officials
act independently of interest group pressures in furtherance of durable
community values like economic growth and full employment and
foreign policy goals like aid to developing nations. t7 These goals and values
typically point to a more open trade posture, although changes in
underlying economic factors can also vary the government's perception of the
Ray argues that a nation's trade policy is "a political equilibrium
that is the product of both self-interest (the micro view) and shared
values (the macro approach)."'" The pursuit of community values by
government is the main motivating force; that effort is "undermined," or
even "sabotaged," by interest group pressures.' 9 Ray advances a
tripartite explanation of national trade policy, based on the interaction of these
two forces, which is reminiscent of Justice Jackson's famous analysis of
presidential power.2 ° When national policies and net interest group
pressures both favor liberalization, trade policy will be clearly liberal; in the
United States, this was the case during the post-World War II period.
When both forces favor protection, policy will be protectionist, as in the
United States during the late nineteenth century. When the two factors
are opposed, however, national policy will be ambiguous, with liberal
initiatives blunted by interest group pressures. Ray sees this situation in
Economy of Protectionism, in IMPORT COMPETITION AND RESPONSE 263 (J. Bhagwati ed. 1982);
Baldwin, TradePoliciesin Developed Countries, in 1 R. JONES & P. KENEN, HANDBOOK OF
INTERNATIONAL ECONOMICS 571 (1984).
16 See Ray, supra note 13, at 302-06. While import-competing firms are, as a rule, better able to
organize and lobby than consumers, an industry with a relatively large number of firms may face
free-rider problems that prevent it from mobilizing at an optimal level. See id. at 291-92, 304-06.
Ray asserts that such industries will favor non-tariff measures, because they can be structured to
grant disproportionate benefits to politically active firms, thus overcoming the free-rider problem.
Id. at 305-06. This is an intriguing insight, but it does not seem to reflect actual practice, at least in
the United States. For example, voluntary export restraint agreements, perhaps the most important
non-tariff measures, typically allocate quota rents to the foreign sellers. See id. at 308.
17 For a discussion of the ability of government to pursue such goals in the face of interest group
pressure, see E. NORDLINGER, ON THE AUTONOMY OF THE DEMOCRATIC STATE (1981).
18 Ray, supra note 13, at 289. For a discussion of other mixed theories, see Abbott, supra note
11, at 515-16.
19 Ray, supra note 13, at 291, 310.
20 Jackson's tripartite analysis-congressional authorization for presidential action,
congressional opposition, and congressional silence-appears in his concurring opinion in the Steel Seizure
Case, Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635-38 (1952)(Jackson, J.
concurring). The analogy is not irrelevant, since the President is often associated with the pursuit of
general community values, Congress with the pressure of special interest groups.
recent United States trade policy: he fears that the national commitment
to liberalization is in danger of being cancelled by mounting pressures for
Borrus and Goldstein also see current United States trade policy as
ambiguous and contradictory, but they advance a much different
theoretical explanation for that state of affairs, and appear to draw quite
different normative conclusions about it. In general, they argue that United
States trade law as presently constituted is ill-suited to deal with the
"enormous strains of adjustment confronting the nation,"22 as
comparative advantage in major industries shifts to other countries and as
massive trade deficits produce a growing foreign debt. Specifically, Borrus
and Goldstein focus on the problems of the United States semiconductor
industry, arguing that it is the victim of strategic trade policies
aggressively practiced by Japan and other countries and that United States
trade law has no satisfactory response to competition of this kind.23
An industry like semiconductors, seeking innovative government
assistance, will face-as in Ray's model-opposition from interest groups
supportive of free trade. The most effective groups will consist of major
exporters of goods and services, firms that favor liberalization and fear
foreign retaliation. Borrus and Goldstein view these groups as relatively
More important, however, an industry like semiconductors must
deal with the established institutions of trade law-the statutes, agencies
and procedures that channel requests for relief from import competition,
closed foreign markets, and other trade problems-and the ideas or
ideologies embedded in those institutions. If the prevailing ideologies and
institutions are not attuned to the industry's problems, relief will not be
forthcoming or will be ineffective. The contrast between this vision of
the political process and Ray's is striking. Both see a role for ideas or
values apart from pure interest group politics, but Ray sees government
as seeking to further current national goals and community values, while
Borrus and Goldstein see the norms and institutions of government as
21 Among Ray's examples are the statutes implementing the Generalized System of Preferences
and the Caribbean Basin Initiative. Both programs were aimed at advancing national goals,
especially assistance to developing nations, but were seriously compromised by the many exceptions
incorporated in the statutes. Ray, supra note 13, at 290-91, 310-11.
22 Borrus & Goldstein, supra note 9, at 331.
23 The real world relevance of strategic trade policy, a relatively recent development in
international economic theory, is itself highly controversial. See STRATEGIC TRADE POLICY AND THE
NEW INTERNATIONAL ECONOMICS (P. Krugman ed. 1986); G. GROSSMAN & J.RICHARDSON,
STRATEGIC TRADE POLICY: A SURVEY OF ISSUES AND EARLY ANALYSIS (1985).
24 Borrus & Goldstein, supra note 9, at 333. See generally I. DESTLER & J. ODELL,
ANTIPROTECTIONISM: CHANGING Focus IN UNITED STATES TRADE POLITICS (1987).
inherited from earlier eras, inflexible, and often out of step with current
values and interests.
Institutions reflect an earlier social consensus or bargain among
powerful interest groups. They are consciously designed to be "sticky, 25
or resistant to change, so that disgruntled groups or independently
minded officials cannot easily undermine the hard-won consensus or
bargain. Ideas, ideologies, and values (like "free trade" or "fair trade") are
embedded in institutions and internalized by relevant actors, legitimating
the institutions. Until an alternative ideology is widely accepted, the
ideas of earlier eras limit the actions government is prepared to take.2 6
Analyzing the trade law of the United States, Borrus and Goldstein
trace the emergence of the ideas of free trade, fair trade, and adjustment
assistance, and the institutions and "forms of action" in which they are
embodied, over three historical periods. These three sets of norms and
institutions, cumulated over time, are now the only categories available
for dealing with the trade problems of the United States economy,
whether of declining industries like steel, recovering industries like
automobiles, or growth industries like semiconductors. 27 The only
ideological alternative, protectionism, remains discredited. In the case of
semiconductors, Borrus and Goldstein argue, none of these categories is
appropriate for countering the industrial policies of Japan.
Clearly, given the powerful theoretical and normative conflicts
between its contributors, this symposium alone will not provide the key to
an understanding of international trade policy. Yet the authors'
provocative theses, expositions of theory, and extensive citations make it an
excellent place to start. The Journalwelcomes replies to this Symposium
to help advance the theoretical and normative debate.
9 See Borrus & Goldstein, United States Trade Policy:Institutions,Norms, andPractices,8 Nw. J. INT'L L . & Bus . 328 , 332 n. 10 ( 1987 ).
10 For a thorough and critical analysis of this argument , see Snidal , The Limits of Hegemonic Stability Theory , 39 INT'L ORG. 579 ( 1985 ).
11 See Borus & Goldstein, supra note 9, at 332 n. 10. For an analysis of international trade law that takes account of both approaches, see Abbott, The TradingNation'sDilemma: The Functionsof the Law ofInternationalTrade, 26 HARV . INT'L L.J . 501 ( 1985 ).
12 See, ag., Borrus & Goldstein, supra note 9 , at 329-31.
13 See Ray , Changing Patternsof Protectionism: The Fallin Tariffs and the Rise in Non-Tariff Barriers, 8 Nw . J. INT'L L . & Bus . 285 , 288 - 89 ( 1987 ).
14 Whatever the outcome, such conflict itself consumes substantial resources . See J. BUCHANAN , R. TOLLISON & G. TULLOCK, TOWARD A THEORY OF THE RENT-SEEKING SOCIETY ( 1980 ).
15 See Ray , supra note 13 , at 291- 92 . For reviews of micro theory, see Baldwin, The Political
25 Borrus & Goldstein, supra note 9, at 334.
26 Goldstein has argued elsewhere that only a theory giving independent force to ideas and institutions-in contrast to theories focusing on the external position of states or on domestic interest group politics-predicts continuing support for liberal trade on the part of the United States . See Goldstein , The PoliticalEconomy of Trade: The Institutionsof Protection, 80 AM. POL. SCI. REV . 161 ( 1986 ).
27 Borrus & Goldstein, supra note 9, at 336.