BARRIERS OR BENEFITS?

BARRIERS OR BENEFITS?

D. Vogel (1997) pp 38-56

 A Summary 

In a Nutshell

The Krasner theory argues that there will be more cooperation when there is a dominant hegemon. We might question whether this hegemonic power distribution is good or bad for development. There are points to be made on either side.

• Good:    Hegemon wants trade; trade leads to cooperation, ideas, peace; hegemon can overcome collective action problems by use of selective incentives.
• Bad:       Hegemon can force openness too soon relative to development status; depends on identity of hegemon; free trade has different effects in different economies; can impose its own organizational structure on free trade (agriculture etc.) that maintains its interests but not the interests of the rest of the world.   

 A hegemon is not necessary for cooperation for Axelrod, what are needed are iterated interactions with an infinite horizon. The tit-for-tat interaction can make it more profitable to trade cooperatively with a partner than the defect strategy which appears more beneficial in a PD game with limited iterations. Institutions are not a necessary component of this type of cooperation.

 Yet institutions may provide the forum for the iterated interactions that make possible the type of cooperation that Axelrod proposes, and realists are skeptical about. They can help solve disputes as to the meaning of cooperation. This includes for example the trade dispute panel of the WTO.

 This text supplies examples which seem to show that in practice there is evidence to suggest that a hegemon is able to impose its own will upon the world trading system. If the developing, or indeed developed world opposes such a move they can use the institutionally arranged dispute settlement process, although in line with the realist prediction, there is no one that can compel the state to adhere to the rules.

 Auto Taxes

The Automobile Tax case where the legality of US environmental tax penalties for certain types of car was challenged by the EC at the WTO is a case in point. Although the ruling was largely in favour of the US regulations, one provision was held to be WTO inconsistent as it discriminated between domestic and imported goods. However, the US refused to change the provision arguing that it had no adverse impact on EU companies. This was a bone of contention in the EC who complained that it did not bode well for the future organization of the multilateral trade system.

 Tuna Dolphin

The Tuna and Dolphin case was related to a US law the banned imports of tuna that had been produced using fishing methods that did not comply with US regulations (enacted to protect dolphin). Mexico filed a complaint with GATT as import restrictions based upon how a product is produced are not permitted. The panel ruled against the US. This ruling outraged environmentalists. The EC and other trading partners were pleased, as they resented the frequent use of unilateral trade sanctions to influence the conservation practices of the US trading partners. The US refused to abide by the ruling.

 A second ruling was similarly ignored by the US. There was a lot of pressure at home from environmental groups – two level games (Putnam).

 Leg Hold Traps

The EC banned imports of fur from nations using leg-hold traps rather than more humane methods. This was response to an intense moral campaign at home. The ban outraged US/Canadians especially as most of the worst affected were indigenous peoples who relied solely on the sale of pelts for their income. The commission decided to postpone the ban in order to allow its partners time to find more humane methods. They were willing to wait for ISO standards (an 80 other countries had already banned them, so action was a lot less unilateral than the US actions on tuna etc.).