¹ Keohane, Robert O. and Nye, Joseph S., Power and Interdependence: World Politics in Transition (Boston: Little, Brown, 1977)Google Scholar; Krasner, Stephen D., “State Power and the Structure of International Trade”, World Politics 28 (04 1976), pp. 317–47Google Scholar.

² See Robert Jervis's article in this volume.

³ The centrality of state actors is not absolute; for example, theregime dealing with international debt repayment is based largely on commercial bank lenders and the International Monetary Fund. See the author's “The InternationalOrganization of Third World Debt”, International Organization 35, 4 (Autumn 1981), pp. 603–631Google ScholarPubMed.

⁴ In manufactured goods, most imports and exports are handled by private firms, either in arms-length trading or in intrafirm transactions. While state agencies and parastatal enterprises are becoming more important traders, their rise probably does not undermine our juxtaposition of an interstate political framework for trade and a more disaggregated, market-oriented framework for decisions about imports and exports, for two reasons. First, parastatal enterprises often operate under incentives and constraints similar to those facing private firms. Second, they are far removed from direct control by central foreign-policy bureaucracies. It is these bureaucracies, together with trade ministries, that represent states in formulating international commercial rules. Thus, even though parastatal enterprises may be playing a greater role in commerce, there remains a disjunction between traders and trade regulators.

⁵ The point is raised most clearly by Gilpin, Robertin U.S. Power and the Multinational Corporation (New York: Basic Books, 1975), pp. 4–5, 19, 40–42; andGoogle ScholarZolberg, Aristide R., “International Migrations in Political Perspective”, in Kritz, Mary, Keely, Charles, and Tomasi, Silvano, eds., Global Trends in Migration: Theory and Research on International Population Movements (New York: Center for Migration Studies, 1981), pp. 3–27Google Scholar.

⁶ Gilpin U.S. Power; Kindleberger, Charles P., The World in Depression (Berkeley: University of California Press, 1973)Google Scholar and “Systems of International Economic Organization”, in Calleo, David P., ed., Money and the Coming World Order (New York: New York University Press for the Lehrman Institute, 1976)Google Scholar; Krasner, , “State Power” and “The Tokyo Round: Particularistic Interests and Prospects for Stability in the Global Trading System”, International Studies Quarterly 23 (12 1979), pp. 491–531Google Scholar.

⁷ See, for example, “U. S., Common Market on Blowup Path”, Wall Street Journal, 18 November 1981, p. 27.

⁸ Gardner, Richard N., Sterling-Dollar Diplomacy (Oxford: Oxford University Press, 1956), chaps. 6, 8, 14, and 17Google Scholar.

⁹ Meyer, F. V., International Trade Policy (New York: St. Martin's, 1978), p. 142Google Scholar.

¹⁰ Krasner, “Tokyo Round”.

¹¹ Keohane, and Nye, suggest this point when they discuss an “international organization model” of regime continuity. See Power and Interdependence, pp. 54–58 and 146–53Google Scholar.

¹² See the work of Helleiner, G. K., especially Intra-Firm Trade and the Developing Countries (New York: St. Martin's, 1981)CrossRefGoogle Scholar.

¹³ This point is a central conclusion of Bauer, , Pool, , and Dexter, in American Business and Public Policy (New York: Atherton Press, 1963)Google Scholar.

¹⁴ Moore, Barrington, Social Origins of Dictatorship and Democracy (Boston: Beacon Press, 1966), p. 35Google Scholar.

¹⁵ Examples are numerous. One very clear statement is by Jackson, John H., “The Crumbling Institutions of the Liberal Trade System”, Journal of World Trade Law 12 (03–04 1978), pp. 93–106. Another is by Gary Sampson of UNCTAD, who argues that “there is a ‘hardening’ of protectionist measures with an increasing reliance on price controls, quantity control and domestic subsidies”.Google ScholarSampson, , “Contemporary Protectionism and Exports of Developing Countries”, World Development 8 (02 1980), p. 113Google Scholar.

¹⁶ The only recent exception was during the deep recession of 1975, when world exports fell 3% in real terms compared to a 1% drop in total output. From 1963 to 1973, trade volume grew 8. 5% annually, compared to a 6% growth in output. The figures for manufacturing alone were slightly higher: an 11% annual growth in trade compared to a 7% annual growth in output. Since 1973 the rate of growth has been slower. Exports grew 4. 5% annually between 1973 and 1979; production grew 3. 5% annually. For manufacturing, the figures for annual trade growth are slightly higher-5% compared to 4% growth of output. All these figures are considerably higher than those in the half-century before the GATT. From 1913 to 1948, trade grew only 0.5% annually, only one-quarter the pace of production. Richard Blackhurst, Nicolas Marian, and Jan Tumlir, Trade Liberalization, Protectionism, and Interdependence, GATT Studies in International Trade no. 5 [hereafter called GATT Study no. 5] (Geneva: GATT, 1977), p. 7Google Scholar; GATT, International Trade 1979/80 (Geneva, 1980), Table 1, p. 2Google Scholar.

¹⁷ Wall Street Journal, 28 May 1981, p. 44.

¹⁸ IMF Survey, 23 March 1981, p. 81.

¹⁹ Ibid., pp. 81, 89.

²⁰ Trade figures are often compared to GNP rather than to production of goods, as we have done here. The comparison to GNP, however, is misleading becausea steadily rising share of GNP involves services, which are not generally traded. Production covers all goods originating in agriculture, forestry, hunting, fishing, mining, quarrying, and manufacturing.

²¹ U.S. Department of Commerce, International Economic Indicators and Competitive Trends, vol. 2 (12 1976), p. 58Google Scholar; vol. 7 (June 1981), Table 36.

²² Malmgren, Harald B., “Interaction of Financial and Commercial Markets: Challenge for Policy Makers”, The World Economy 3 (11 1980), p. 289Google Scholar. This rise in traderelative to production and income runs counter to the generalizations of Deutsch, Karl W. and Eckstein, Alexander in “National Industrialization and the Declining Share of the International Economic Sector, 1890–1959”, World Politics 13, 2 (01 1961), especially pp. 296–97Google Scholar. Deutsch and Eckstein put forward a number of generalizations concerning the relationship between “stages of industrialization” and the share of trade in the national economy. Their data, unfortunately, are colored by dramatic differences in trade barriers during the period they consider and by radical changes in the world trade regime-points they fail to recognize.

²³ Jock Finlayson and Mark Zacher, in their recent study of the GATT, argue that the “norm of liberalization or free trade is often regarded as central to the GATT regime, but it did not have the paramountcy of nondiscnmination in the immediate postwar years. Liberalization was regarded as important by many American officials, but it was not a primary goal of most other industrial and developing countries”. Finlayson, and Zacher, , “The GATT and the Regulation of Trade Barriers: Regime Dynamics and Functions”, International Organization 34, 4 (Autumn 1981), p. 570Google Scholar. This conclusion is misleading. Certainly nondiscnmination was important in the GATT's founding: the Americans, in particular, especially wanted to dismantle Commonwealth Preferences. But in the end the U. S. not only allowed existing preferences to remain but allowed European reconstruction to be built upon regional discrimination against the dollar. Tariff-cutting, by contrast, was an important goal to most industrial countries from theearliest days of the GATT. Karin Kock, citing documents from the International Trade Organization's 1946 Preparatory Committee meeting in London, says that “the ultimate objective of the negotiations was ‘to bring about the substantial reduction of tariffs and the elimination of tariff preferences’”. Kock, , International Trade Policy and the Gatt, 1947–1967 (Stockholm: Almqvist and Wiksell, 1969), p. 63Google Scholar. Robert Hudec, noting that the GATT grew out of ITO preparatory sessions, points out that the GATT “was not intended to be a comprehensive world organization. It was a temporary side affair meant to serve the particular interests of the major commercial powers who wanted a prompt reduction of tariffs among themselves”. Hudec, , The GATT Legal System and World Trade Diplomacy (NewYork: Praeger, 1975), p. 30Google Scholar. Liberalization thus seems to rank alongside nondiscnmination as a central GATT principle from the earliest days. Finlayson and Zacher provide a useful summary of other GATT norms. On the substantive side, they list reciprocity, safeguarding against import surges, and economic development. Procedurally, they list multilateral negotiations and a special role for states with major trading interests.

²⁴ According to the GATT's figures, which are based on ten developed import markets, the Tokyo Round reduced tariffs on industrial products 33% on a weighted basis, 38% on a simple-average basis. On a weighted basis, post-multilateral trade negotiation tariffs on finished manufactures are 6. 9%; on semimanufactures, 4. 1%. GATT, The Tokyo Round of Multilateral Trade Negotiations (Geneva, 1979), pp. 117–20Google Scholar.

²⁵ James Kurth offers an explanation of Britain's free trade policies based on sectoral economic changes. See Kurth, James, “The Creation and Destruction of International Regimes: The Impact of the World Market”, paper delivered at the American Political Science Association meeting, Washington, D. C., 08 1980Google Scholar. While Kurth's emphasis is on national policies, his focus on differences in sectors' adaptation to international competition parallels a theme in this article.

²⁶ John Gerard Ruggie's article in this volume. Ruggie'sterm is a useful interpretative device, especially in distinguishing modern trade politics from that of the nineteenth century, but it does raise problems. One is to define theforms of illiberal protection. The second is to differentiate embedded liberalism from illiberalism in practice. Unless one is examining a long-term trend, it may be impossibleto tell whether specific trade barriers are (1) illiberal steps toward broader protection, or (2) simply efforts to moderate the impact of the world market on domestic society (“embedded liberalism”).

²⁷ If two nations, A and B, have a most-favored-nation treaty, then neither can import the same items from nation C at lower tariffs. Given a network of such treaties, any bilateral tariff reduction becomes a multilateral reduction.

²⁸ Ratcliffe, Barrie M., “The Origins of the Anglo-French Commercial Treaty of 1860: A Reassessment”, in Ratcliffe, , ed., Great Britain and Her World, 1750–1914 (Manchester, England: Manchester University Press, 1975), pp. 125–51Google Scholar; Iliasu, A. A., “The Cobden-Chevalier Commercial Treaty of 1860”, Historical Journal 14 (1971), pp. 67–98Google Scholar; Platt, D. C. M., Finance, Trade, and Politics: British Foreign Policy 1815–1914 (Oxford: Oxford University Press, 1968), pp. 85–101Google Scholar; Curzon, Gerard, Multilateral Commercial Diplomacy (London: Michael Joseph, 1965), pp. 15–20Google Scholar.

²⁹ The classic treatment is Alexander Gerschenkron, Bread and Democracy in Germany (berkeley, 1943; New York: Howard Fertig, 1960), esp. pp. 21–88; see alsoGoogle ScholarBöhme, Helmut, “Big Business Pressure Groups and Bismarck'sTurn to Protectionism, 1873–79”, Historical Journal 10 (1967), pp. 218–36Google Scholar.

³⁰ For a comparative analysis of national policies, see Gourevitch, Peter Alexis, “International Trade, Domestic Coalitions and Liberty: Comparative Responses to the Crisis of 1873–1896”, Journal of Interdisciplinary History (Autumn 1977), pp. 281–313CrossRefGoogle Scholar.

³¹ This broad consensus about the proper pace and limits of trade liberalization does not imply agreement about specific acts of protection. It does, however, reduce the likelihood that, through miscommunication, some act of trade protection would lead to a deteriorating withdrawal of prior concessions. (From different analytic perspectives, both Keohane and Ruggie stress the communicative aspects of regimes.) The newly industrializing countries (NICs) have not yet joined this broad consensus, perhapsbecause their fast-rising exports face a thicket of barriers. Among developed countries, there are dark mutterings that the NICs misunderstand the GATT process, offer few concessions themselves (a kind of passive unilateralism), and threaten the liberalization process by exporting aggressively and then demanding rigid adherence to prior trade concessions.

³² The GSP is a literal violation of nondiscrimination but hardly a mortal blow. National concessions under the program have been limited by product, by producer, and in their overall size. Moreover, as tariffs are reduced on a multilateral basis, the GSP offers a smaller margin of preference. It is best understood as a limited program, congruent with the GATT's principled support for economic development, designed to widen international participation in trade. In terms of nondiscrimination, a more serious problem is the persistence and extension of regional trading arrangements. While some regional arrangements are explicitly permitted under the GATT, there is certainly a tension between them and the norm of nondiscrimination. The problem is worsened when regional groups like the EC extend preferential arrangements to third states (their former colonies in Africa, the Caribbean, and the Pacific, the so-called ACP countries). The impact of these extra-regime arrangements on behavior is captured in the economists ‘ distinction between trade creation and trade diversion.

³³ IMF Survey, 23 February 1981, p. 59.

³⁴ Ibid., p. 61.

³⁵ Bank for International Settlements, 1981 Annual Report, table, p. 105Google Scholar.

³⁶ GATT Study no. 5, p. 44. An extensive IMF study makes much the same point by focusing on steel, textiles and clothing, footwear, and shipbuilding. See Nowzad, Bahram, The Rise in Protectionism, International Monetary Fund Pamphlet Series no. 24 (1978)Google Scholar.

³⁷ Franko, Lawrence G., “Current Trends in Protectionism in Industrialized Countries: Focus on Western Europe”, in Helleiner, G. K., , Franko, Junz, Helen B., and Dreyer, Peter, Protectionism or Industrial Adjustment? (Paris: Atlantic Institute for International Affairs, 1980), pp. 32–33Google Scholar. Also see Pelkmans, Jacques, “The European Community and the Newly Industrializing Countries”, Journal of European Integration 4, 2 (1981), pp. 140–41Google Scholar.

³⁸ This point is emphasized in Pastor, Robert, Congress and the Politics of U.S. Foreign Economic Policy, 1929–1976 (Berkeley: University of California Press, 1980), chaps. 3–6Google Scholar.

³⁹ Franko, , “Current Trends in Protectionism”, p. 37Google Scholar.

⁴⁰ Blackhurst, Richard, Marian, Nicolas, and Tumlir, Jan, Adjustment, Trade and Growth in Developed and Developing Countries, GATT Studies in International Trade no. 6 (Geneva: GATT, 1978), p. 72Google Scholar.

⁴¹ Krauss, Melvyn B., The New Protectionism: The Welfare State and International Trade (New York: New York University Press for the International Center for Economic Policy Studies, 1978), pp. 35–36Google Scholar.

⁴² The most prominent bilateral dispute was between the U. S. and Japan; for a full account see Destler, I. M., Fukui, Haruhiro, and Sato, Hideo, The Textile Wrangle: Conflict in Japanese-American Relations, 1969–1971 (Ithaca: Cornell University Press, 1979)Google Scholar.

⁴³ Athulathmudali, Lalith, “Forthcoming Negotiations on the Multi-fibre Arrangement”, The World Economy 3 (06 1980), pp. 1–12Google Scholar; Smith, Patrick, “The Fibres of Protectionism”, Far Eastern Economic Review, 15 04 1981, pp. 74–76Google Scholar; Farrands, Chris, “Textile Diplomacy: The Making and Implementation of European Textile Policy, 1974–1978”, Journal of Common Market Studies 18 (09 1979), pp. 22–39Google Scholar.

⁴⁴ Walter, Ingo, “The Protection of Industries in Trouble-The Case of Iron and Steel”, The World Economy 2 (04 1979), p. 185CrossRefGoogle Scholar.

⁴⁵ IMF, Annual Report on Exchange Arrangements and Exchange Restrictions, 1980, p. 6Google Scholar. A rare counterexample (but perhaps a signal of future policy) is President Reagan's lifting of U. S. quotas on shoes imported from Taiwan and South Korea. New York Times, 1 July 1981, p. 1.

⁴⁶ For a discussion of the differences between VERs and the GATT's favored method of protecting against import surges, Article XIX, see Hindley, Brian, “Voluntary Export Restraints and the GATT'sMain Escape Clause”, The World Economy 3 (11 1980), pp. 313–41CrossRefGoogle Scholar.

⁴⁷ I wish to thank Stephen Haggard for his comments on this point.

⁴⁸ Zysman, John, “The French State in the International Economy”, in Katzenstein, Peter, ed., Between Power and Plenty (Madison: University of Wisconsin Press, 1978)Google Scholar, and Zysman, , Political Strategies for Industrial Order: State, Market and Industry in France (Berkeley: University of California Press, 1977)Google Scholar.

⁴⁹ This point is developed in Krauss, The New Protectionism, chap.4. Note, however, that these are net advantages relative to foreign producers only if they are not offset by higher taxes or other state-imposed requirements that raise marginal costs. According to Krauss, state intervention generally corrupts the mechanisms of market adjustment and so is likely to deteriorate into protectionism. There is a logic there, but he fails to answer why, if it is the overriding logic, Scandinavian countries with large state sectors have been such bulwarks of trade liberalism.

⁵⁰ Business Week, 1 June 1981, p. 80.

⁵¹ Dam, Kenneth W., The GATT: Law and International Economic Organization (Chicago: University of Chicago Press, 1970), p. 4Google Scholar.

⁵² The theme of shared understandings is developed by Hudec in The GATT Legal System, Parts II and III.

⁵³ Dam, , The GATT, pp. 3–9Google Scholar.

⁵⁴ Hudec, Robert, Adjudication of International Trade Disputes, Thames Essay no. 16 (London: Trade Policy Research Centre, 1978), p. 3Google Scholar.

⁵⁵ Fawcett, James, International Economic Conflicts (London: Europa Publications for the David Davies Memorial Institute of International Studies, 1977), pp. 47–49Google Scholar. Fawcett emphasizes the underlying consensus on the desirability of a liberal economic order and a willingness to seek compromises between domestic producer claims and the requirements of economic integration. Hudec's works strongly underscore the same point.

⁵⁶ Hudec, , The GATT Legal System, p. 60Google Scholar.

⁵⁷ Ibid., p. 199.

⁵⁸ At the GATT Annecy Conference in 1949, for example, the U.S. unsuccessfully proposed most-favored-nation treatment for Japan. “[T]The United Kingdom informed the American Embassy in London that it could not consider an M-F-N agreement for Japan until after the estab-lishment of an exchange rate and sufficient time to show the effect of the new rate. Conversations in The Hague and Brussels indicated that the Benelux countries would oppose such an agreement at Annecy and conversations in Annecy indicated that other countries, including the key trading countries were also opposed. It became apparent that any working party which might be set up to consider such an agreement would, be opposed to the proposal”. Foreign Relations of the United States, 1949, vol. 1 (Washington, D.C.: GPO, 1976), p. 718Google Scholar, from “Confidential Report by the Chairman of the United States Delegation (Willoughby) to the Secretary of State”. Also see ibid., 658–61, 670–72, 694–95.

⁵⁹ The EC's agricultural policies, protective from the beginning, grew increasingly restrictive during the 1960s. They met with strong American opposition, and their legality under the GATT was challenged. Several points about these agricultural policies are relevant to our discussion of the trade regime. First, agriculture had never been an integral part of the liberal trade regime. “GATT draftsmen”, according to Hudec, “had taken it for granted that governments would manage and support agricultural prices, and that they would need to protect these pricesupport programs against imports” (The GATT Legal System, p. 200). The result was a compromise rule that permitted quantitative restrictions but also sought to encourage imports. The compromise ultimately failed because it was inconsistent with domestic price-support schemes, which entailed surpluses well above domestic requirements. Second, the first prominent rule violations came from the regime leader-the V.S. With the Dairy Quota case in 1951 and the demand for a complete waiver from GATT agricultural obligations in 1955, the U. S. openly disregarded GATT rules. Third, the pattern of rule violation in agriculture included even the most liberal traders, such as the Scandinavians. Fourth, while the EC's Common Agricultural Policy proclaimed virtual autonomy in agriculture, it was not ruled illegal by the GATT's contracting parties. Their timorousness on the issue may have reflected the prior breakdown of rules governing agricultural trade. It may also have reflected a genuine legal ambiguity, since variable levies had not been anticipated when the GATT was drafted and so were not prohibited. Finally, the breakdown of rules in agriculture proved less than catastrophic: there was little retaliation despite several threatening situations; some agreements were made regarding agricultural exports to third markets; and agricultural trade volume continued to grow, partly because of government moderation in imposing restraints, partly because agricultural demand was outpacing subsidized domestic supply (The GATT Legal System, pp. 200–203).

⁶⁰ Hudec, Robert, “GATT Dispute Settlement After the Tokyo Round”, Cornell International Law Journal 13 (Summer 1980), p. 153Google Scholar.

⁶¹ Hudec, , Adjudication of International Trade Disputes, pp. 2–3Google Scholar.

⁶² Jackson, , “Crumbling Institutions”, p. 98Google Scholar.

⁶³ Hudec, , The GATT Legal System, p. 193Google Scholar.

⁶⁴ Hudec, , “GATT Dispute Settlement”, p. 181Google Scholar.

⁶⁵ Jackson, John H., “Governmental Disputesin International Trade Relations: A Proposal in the Context of GATT”, Journal of World Trade Law 13 (01–02 1979), pp. 5–6. Also seeGoogle ScholarJackson, , “Crumbling Institutions”, p. 97Google Scholar.

⁶⁶ Hudec, , The GATT Legal System, pp. 193–94Google Scholar.

⁶⁷ GATT Study no. 5, p. 9.

⁶⁸ Gilpin, U. S. Power; Kindleberger, The World in Depression; Kindleberger, “Systems of International Economic Organization” Krasner, “State Power”.

⁶⁹ Robert Keohane is surely correct when he observes that it is not a pure public good since states may be excluded from the GATT or from Most-Favored-Nation status. Keohane, , “The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967–1977”, in Holsti, Ole, Siverson, Randolph, and George, Alexander L., eds., Change in the International System (Boulder, Col.: Westview, 1980), fn. 10, p. 158Google Scholar. Nevertheless, the public good notion is heuristically interesting, in part because it associates some narrowly self-interested state actions with free ridership. It also suggests, persuasively for both the postwar United States and 19th century Britain, that the hegemon's policies may be directed toward the long-term goal of regime maintenance (for which it is willing to assume short-term costs, even if other states will not or cannot share them) rather than toward short-term economic advantages. The public-good concept of hegemonic stability is suggested by Kindleberger's work on the Great Depression. Interestingly, however, Kindleberger introduces a powerful element of national voluntarism into his discussion. The capacity to act as a hegemon (that is, a hegemonic international structure of resources) does not necessarily imply stability for Kindleberger since a prospective international leader may still pursue policies appropriate to a free rider. That is largely his evaluation of American international economic policies in the 1920s and 1930s. This element of policy choice means that his model incorporates features from both national and international levels. Stephen Krasner, on the other hand, attempts to explain open trading systems by focusing more rigorously on the structure of hegemonic and nonhegemonic systems. Still, Krasner discusses reasons why a hegemonic power is likely to favor openness and thus to pursue it. See Krasner, , “State Power”, pp. 322–23Google Scholar.

⁷⁰ Krasner, , “State Power”, p. 322Google Scholar.

⁷¹ Ibid., p. 318. Actually Krasner's data and hisinterpretation are considerably more equivocal than he suggests in this summary (see ibid., p. 335).

⁷² Krasner develops this point in “The Tokyo Round”. Summarizing his views, he argues that “ as U. S. power has declined its leaders have become more concerned with specific national economic interests, making their behavior more similar to the behavior of policy makers in other states. This has led to a differentiated trading regime with some sectors characterized by greater liberality and others by more closure” (p. 491).

⁷³ U. S. Department of Commerce, International Economic Indicatorsand Competitive Trends 1, 2 (06 1981), table 28Google Scholar.

⁷⁴ Franko, , “Current Trends in Protectionism”, p. 29Google Scholar.

⁷⁵ Burenstam-Linder, Staffan, “How to Avoid a New International Economic Disorder”, The World Economy 3 (11 1980), p. 275CrossRefGoogle Scholar.

⁷⁶ Baldwin, Robert E., Mutti, John H., and Richardson, J. David, “Welfare Effects on the United States of a Significant Multilateral Tariff Reduction”, Journal of International Economics 10 (1980), p. 405CrossRefGoogle Scholar.

⁷⁷ Keohane, in “Theory of Hegemonic Stability”, notes that U. S. power resources, as measured by shares of world trade among major states, have changed less in trade than in money or oil. Since the regime also changed less, he notes that the hegemonic stability theory is not disconfirmed. He does, however, challenge the causal argument linking this tangible resource change to changes in the regime, a point we take up later in this article.

⁷⁸ Meyer, , International Trade Policy, p. 142Google Scholar; Kindleberger, Charles, “Government Policies and Changing Shares in World Trade”, American Economic Review 70 (04 1980), pp. 293–94Google Scholar.

⁷⁹ Krauss, , The New Protectionism, p. 18Google Scholar. The tenor of the U. S. position is best shown by a secret statement made by the U. S. representative to the GATT's Torquay negotiations in November 1950. First, he praised the British for liberalizing restrictions against imports from certain soft-currency countries. Then he added, “We have recognized this action as a step in progress towards a worldwide multilateral trading system and convertibility of currencies. We have felt that it was taken in conformity with the spirit in which all of us have entered into the GATT that restrictions, particularly discriminatory restrictions, are the exception to the rule and should be relaxed as t he situation which led to their imposition improved and should be removed when the circumstances which led to their imposition have been corrected”. ForeignRelations of the United States, 1950, vol. 1 (Washington, D.C.: GPO, 1977), p. 769Google Scholar.

⁸⁰ Hirschman, Albert O., National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1945)Google Scholar.

⁸¹ On the congruence of purpose, see Ruggie in this volume.

⁸² Meyer, , International Trade Policy, p. 142Google Scholar.

⁸³ Ibid., p. 141.

⁸⁴ Ibid., p. 137.

⁸⁵ Ibid., p. 138.

⁸⁶ Keohane, , “Theory of Hegemonic Stability”, pp. 152–54Google Scholar.

⁸⁷ The relationship between American hegemony and the postwar consensus is complex. But Europe's support for liberal trade closely followed American initiatives and could hardly be termed autonomous, even if it did have strong domestic roots. To begin with, America ‘s victory wiped out Germany's closed regional trade system. The regionalism that replaced it had extensive American involvement and was intended as an interim step toward multilateral trade and payments. The U. S. played a major role in the formation of postwar governments, and naturally paid special attention to their foreign policy positions. The U. S. established the institutions of liberal internationalism and those of Atlantic cooperation. It aimed at, and succeeded in, demolishing the protective network of Depression-era tariffs. This is not meant to imply that Europe was a tabula rasa for American designs or that governments there did not freely support these policies and institutions. But their support was clearly structured at every level by the magnitude of the American victory, the disparity of resources (and Europe's desperate need for them), and Europe's profound dependence on American foreign policy.

⁸⁸ Winham, Gilbert, The Automobile Trade Crisis of 1980 (Halifax, Nova Scotia: Dalhousie University Centre for Foreign Policy Studies, 1981)Google Scholar; Walter, , “Protection of Industries in Trouble”; [Schlosser, Allen], “Autos Dominated Congress' Trade Agenda during 1980”, JEI [Japan Economic Institute] Report, 9 01 1981Google Scholar.

⁸⁹ The size of the textile and clothing sector is especially important. For Hong Kong, textiles and apparel account for nearly half of all exports; for South Korea, about one-third. Smith, “The Fibres of Protectionism”, p. 74. For LDCs as a whole, they represent over one-third of all exports to advanced countries. Keesing, Donald B., “World Trade and Output of Manufactures: Structural Trends and Developing Countries' Exports”, World Bank Working Paper no. 316 (01 1979), Table 18, p. 25 (figures are for 1976)Google Scholar. At the same time, many LDC producers are developing increasing sophistication in their manufacturing and exporting capabilities.

⁹⁰ The literature on intra-industry trade is rapidly growing. The best place to begin is Grubel, Herbert G. and Lloyd, P. J., Intra-industry Trade: The Theory and Measure of International Trade in Differentiated Products (New York: Wiley, Halsted Press 1975)Google Scholar. The most recent work in the area, by some of the best-known scholars, is collected in Giersch, Herbert, ed., On the Economics of Intra-industry Trade (Tubingen: J. C. B. Mohr [Paul Siebeck], 1979)Google Scholar.

⁹¹ Grubel, and Lloyd, , Intra-industry Trade, p. 9Google Scholar.

⁹² Ibid., chap. 3. All commodities are categorized according to the SITC system. The first digit in a commodity's SITC number refers to the broadest product grouping. The second, third, and fourth digits entail successively finer gradations. Category 7, for instance, includes all machinery and transport equipment; 72 refers to machines designed especially for particular industries; 721 is all agricultural machinery except tractors; 721.4 is egg-handling machinery and parts. Three points are relevant to our discussion. First, the SITC numbers do not consistently categorize commodities according to their inputs or end-uses. Hence, they are not necessarily identical to industry groupings, even though they are used to measure inter-industry and intraindustry trade. Moreover, if inputs are dissimilar, then imports and exports within the same SITC category may be perfectly consistent with the Heckscher-Ohlin model of trade. Finally, the amount of intra-industry trade depends upon the level of statistical disaggregation. A country might export egg-handling equipment (721. 4) and import all dairy machinery (721. 3). At the 4-digit level, no intra-industry trade is found. At the 3-digit level, however, the same trade pattern would be considered simultaneous imports and exports of agricultural machinery. Most studies of intra-industry trade classify industries at the 3- or 4-digit SITC level.

⁹³ Aquino, Antonio, “Intra-industry Trade and Inter-Industry Specialization as Concurrent Sources of International Trade in Manufactures”, Weltwirtschaftliches Archiv 114 (1978), pp. 275–95CrossRefGoogle Scholar.

⁹⁴ “The facts on intra-industry trade can be briefly stated”, according to trade economist W. M. Corden. “(1) Intra-industry trade as a proportion of total trade in manufactured commodities is very high for the leading industrial nations…. (2) The proportion of intra-industry trade in total trade has tended to increase”. Corden, , “Intra-industry Trade and Factor Proportions Theory”, in , Giersch, On the Economics of Intra-industry Trade, p. 3Google Scholar. In the same volume (p. 242) Jan Tumlir of the GATT reports that intra-industry trade accounts for much of the large expansion of postwar trade. See also Aquino, “Intra-industry Trade and Specialization”; Grubel and Lloyd, Intra-industry Trade; and Hesse, Helmut, “Hypotheses for the Explanation of Trade between Industrial Countries, 1953–1970”, in Giersch, Herbert, ed., The International Division of Labour: Problems and Perspectives (Tubingen: J. C. B. Mohr, 1974), pp. 39–59Google Scholar.

⁹⁵ Balassa, Bela, “Intra-industry Trade and the Integration of Developing Countries in the World Economy”, in , Giersch, On the Economics of Intra-industry Trade, pp. 245–46Google Scholar.

⁹⁶ See, for example, Grubel and Lloyd, Intra-industry Trade, chap. 9; Hufbauer, Gary C. and Chilas, John C., “Specializationby Industrial Countries: Extent and Consequences”, in , Giersch, International Division of Labour, pp. 3–38Google Scholar.

⁹⁷ Hufbauer, and Chilas, , “Specialization by Industrial Countries”, p. 6Google Scholar. The less important role played by intra-industry trade in commerce between LDCs and developed countries implies higher adjustment costs for any given volume of trade and may be an additional source of protectionist pressure. As Rudolf Loertscher and Frank Wolter concluded from their study, “As expected, intra-industry trade intensity across countries increases with a decreasing development stage differential; a decreasing market size differential; increasing average market size; and decreasing distance between trading partners” (“Determinants of Intra-industry Trade: Among Countries and Across Industries”, Weltwirtschaftliches Archiv 116, 2 [1980], p. 268)Google Scholar. Except for the distance factor, all of these variables suggest a low intra-industry trade intensity for DC-LDC trade. In an article which, on the whole, deemphasizes the disruption of LDC exports to DCs, Carl Hamilton and Mordechai E. Kreinin nevertheless observe that such trade “probably generates much wter-industry specialization, which is presumably subject to higher adjustment cost than the increase in intra-industry specialization in trade among industrial countries themselves” (“The Structural Pattern of LDCs' Trade in Manufactures with Individual and Groups of DCs,“ Weltwinschaflliches Archiv 116, 2 [1980], p. 274, emphasis mine)Google Scholar. One possible offsetting feature of LDC trade is its vertical specialization in unskilledlabor intensive operations and its subsequent incorporation in intra-firm flows across borders.See Balassa, , “Intra-industry Trade”, p. 267Google Scholar.

⁹⁸ Meltzer, Ronald I., “The Politics of Policy Reversal: The U.S. Response to Granting Trade Preferences to Developing Countries and Linkages between International Organizations and National Policy Making”, International Organization 30, 4 (Autumn 1976), pp 649–68CrossRefGoogle Scholar.

⁹⁹ See Pastor, , Congress and U. S. Foreign Economic Policy, esp. pp. 192–93Google Scholar.

¹⁰⁰ Destler, I. M. and Graham, Thomas R., “The United States Congress and the Tokyo Round: Lessons of a Success Story”, The World Economy 3 (05 1980), p. 54CrossRefGoogle Scholar.

¹⁰¹ Winham, Gilbert, “Robert Strauss, the MTN, and the Control of Faction,” Journal of World Trade Law 14 (09–10 1980), pp. 377–97Google Scholar.

¹⁰² Brandt, Harold and Zeitler, Wilhelm A., “Unfair Import Trade Practice Jurisdiction: The Applicability of Section 337 and the Countervailing Duty and Antidumping Laws”, Law and Policy in International Business 12 (1980), p. 105Google Scholar.

¹⁰³ Destler, and Graham, , “U. S. Congress and Tokyo Round”, p. 66Google Scholar; III, John J. Barcelo, “Subsidies, Countervailing Duties and Antidumping After the Tokyo Round,” Cornell International Law Journal 13 (Summer 1980), pp. 269–70Google Scholar.

¹⁰⁴ Meltzer, Ronald I., “Dynamics of Trade Adjustment Difficulties: Color TVs and U. S. -Japanese Relations”, paper presented at International Studies Association convention, Washington, D. C., 1978Google Scholar. This treatment of the Zenith case relies on Meltzer's discussion.

¹⁰⁵ Ibid., p. 17.

¹⁰⁶ Hufbauer, and Chilas, , “Specialization by Industrial Countries”, p. 6Google Scholar.

¹⁰⁷ Morgan, A. D., “Export Competition and Import Substitution: The Industrial Countries, 1963 to 1971”, in Batchelor, R. A., Major, R. L., and Morgan, A. D., Industrialisation and the Basis for Trade (Cambridge: Cambridge University Press for the National Institute of Economic and Social Research, 1980), p. 76Google Scholar.

¹⁰⁸ Mordechai Kreinin and Lawrence Officer report that these findings are made in studies by Krause (1959), Kreinin (1961), Balassa and Kreinin (1967), Officer and Hurtubise (1969), and Finger (1976) (“Tariff Reductions under the Tokyo Round: A Review of Their Effects on Trade Flows, Employment, and Welfare”, Weltwirtschaftliches Archiv 115 [1979], p. 551 fn)Google Scholar.

¹⁰⁹ Ibid., p. 551.

¹¹⁰ IMF Survey, 23 March 1981, p. 81.

¹¹¹ Kreinin, and Officer, “Tariff Reductions”, p. 551Google Scholar. In a more recent study, Baldwin, Mutti, and Richardson also examine a 50% tariff cut by all advanced countries (but excluding imports, such as textiles, that are subject to quantitative restrictions). Their findings are similar to the studies reviewed by Kreinin and Officer. Under both fixed and flexible exchange rates, U.S. imports and exports each increase $1.75 billion in 1967 dollars. Baldwin, , Mutti, , and Richardson, , “Welfare Effects on the U. S.”, esp. p. 417Google Scholar.

¹¹² Brown, Fred and Whalley, John, “General Equilibrium Evaluations of Tariff-Cutting Proposals in the Tokyo Round and Comparisons with More Extensive Liberalisation of World Trade”, Economic Journal 190 (12 1980), p. 865Google Scholar.

¹¹³ Ibid., p. 862.

¹¹⁴ Address by Olivier Long, secretary-general of the GATT, to the Zürich Economic Society, 9 November 1977, as cited in Nowzad, “The Rise of Protectionism”, p. 4.

¹¹⁵ Olechowski, Andrzej and Sampson, Gary, “Current Trade Restrictions in the EEC, the United States and Japan”, Journal of World Trade Law 14 (04–05 1980), p. 227Google Scholar.

¹¹⁶ Brown, and Whalley, , “General Equilibrium Evaluations”, Table 4, p. 848Google Scholar.

¹¹⁷ I wish to thank Raymond Vernon for his comments on this point.See also Hufbauer, G. C., Erb, J. S., and Starr, H. P., “The GATT Codes and the Unconditional Most-Favored-Nation Principle”, Law and Policy in International Business 12 (1980), p. 61Google Scholar.

¹¹⁸ Pastor, , Congress and U.S. Foreign Economic Policy, esp. pp. 192–93Google Scholar.