《国际政治经济学》文献资料（Political Economy of Regionalization and Globalization）Multilateral Determinants of Regionalism The Effects of GATTWTO on the Formation of Preferential Trading Arrangements

Multilateral Determinants of Regionalism:The Effects of GATT/WTO on the Formation of Preferential Trading Arrangements Edward D.Mansfield and Eric Reinhardt Abstract Preferential trading arrangements(PTAs)have spread widely over the past fifty years.During the same era,multilateral openness has grown to unprec- edented heights,spurred by the General Agreement on Tariffs and Trade (GATT) and its successor,the World Trade Organization (WTO).If the cornerstone of the manifestly successful multilateral regime is nondiscrimination,why have its mem- bers increasingly resorted to preferential liberalization?We argue that developments at the heart of GATT/WTO encourage its members to form PTAs as devices to ob- tain bargaining leverage within the multilateral regime.Specifically,the growth in GATT/WTO membership,the periodic multilateral trade negotiation rounds,as well as participation and,especially,losses in formal GATT/WTO disputes,have led its members to seek entrance into PTAs.Conducting the first statistical tests on the sub- ject,we find strong evidence in support of this argument. What are the problems of the GATT that lead countries to turn to their neigh- borhood instead? Paul Krugman(1993,73) During the past fifty years,the international trading system has been marked by the rapid proliferation of preferential trading arrangements(PTAs).During the same era,multilateral openness has grown to unprecedented heights,spurred by the General Agreement on Tariffs and Trade(GATT)and its successor,the World Trade Organization (WTO).That these developments have occurred in tandem is some- what surprising.Whereas the norm of nondiscrimination in trade is the corner- For helpful comments,we are grateful to Marc Busch,Peter Gourevitch,David Lake,Lisa Martin, Joy Mazumdar,Helen Milner,Thomas Oatley,Caglar Ozden,Francisco Parodi,Jon Pevehouse,Jay Smith,Jeffrey Stacey,Chris Zorn,and two anonymous reviewers.For research assistance,we thank Yoram Haftel,Jesse Hamner,and Jon Pevehouse.Earlier versions of this article were presented at the 2000 Annual Meeting of the American Political Science Association,Washington,D.C.;the 2001 An- nual Meeting of the Midwest Political Science Association,Chicago;and seminars at Emory Univer- sity,the University of Chicago(PIPES),the University of Illinois,and the University of Wisconsin. International Organication 57,Fall 2003,pp.829-862 2003 by The IO Foundation. D0:10.1017/S0020818303574069

Multilateral Determinants of Regionalism: The Effects of GATT/WTO on the Formation of Preferential Trading Arrangements Edward D+ Mansfield and Eric Reinhardt Abstract Preferential trading arrangements ~PTAs! have spread widely over the past fifty years+ During the same era, multilateral openness has grown to unprec￾edented heights, spurred by the General Agreement on Tariffs and Trade ~GATT! and its successor, the World Trade Organization ~WTO!+ If the cornerstone of the manifestly successful multilateral regime is nondiscrimination, why have its mem￾bers increasingly resorted to preferential liberalization? We argue that developments at the heart of GATT0WTO encourage its members to form PTAs as devices to ob￾tain bargaining leverage within the multilateral regime+ Specifically, the growth in GATT0WTO membership, the periodic multilateral trade negotiation rounds, as well as participation and, especially, losses in formal GATT0WTO disputes, have led its members to seek entrance into PTAs+ Conducting the first statistical tests on the sub￾ject, we find strong evidence in support of this argument+ What are the problems of the GATT that lead countries to turn to their neigh￾borhood instead? Paul Krugman ~1993, 73! During the past fifty years, the international trading system has been marked by the rapid proliferation of preferential trading arrangements ~PTAs!+ During the same era, multilateral openness has grown to unprecedented heights, spurred by the General Agreement on Tariffs and Trade ~GATT! and its successor, the World Trade Organization ~WTO!+ That these developments have occurred in tandem is some￾what surprising+ Whereas the norm of nondiscrimination in trade is the corner￾For helpful comments, we are grateful to Marc Busch, Peter Gourevitch, David Lake, Lisa Martin, Joy Mazumdar, Helen Milner, Thomas Oatley, Çaglar Özden, Francisco Parodi, Jon Pevehouse, Jay Smith, Jeffrey Stacey, Chris Zorn, and two anonymous reviewers+ For research assistance, we thank Yoram Haftel, Jesse Hamner, and Jon Pevehouse+ Earlier versions of this article were presented at the 2000 Annual Meeting of the American Political Science Association, Washington, D+C+; the 2001 An￾nual Meeting of the Midwest Political Science Association, Chicago; and seminars at Emory Univer￾sity, the University of Chicago ~PIPES!, the University of Illinois, and the University of Wisconsin+ International Organization 57, Fall 2003, pp+ 829–862 © 2003 by The IO Foundation+ DOI: 10+10170S0020818303574069

830 International Organization stone of GATT/WTO,PTAs vest each member with preferential access to the other participants'markets.Equally surprising is that most preferential groupings are composed of GATT/WTO members.It is not clear why states form preferential economic blocs when they belong to a successful multilateral regime.How the spread of PTAs will affect the GATT/WTO system has been widely studied and fiercely debated.Remarkably little research,however,has addressed how,if at all,the multilateral regime has conditioned the spread of PTAs. We argue that GATT/WTO has played a large role in stimulating the formation of PTAs.A central reason why states enter PTAs is to increase their bargaining power.Preferential arrangements serve this purpose by furnishing states with insurance against the emergence of conditions within GATT/WTO that could threaten their economic interests,as well as by giving states a greater voice in multilateral trade talks and increasing their market power.Developments within the multilateral regime can create incentives for states to enhance their bargaining power,thereby triggering the establishment of preferential groupings.These developments include the growth of GATT/WTO membership,which has reduced each participant's leverage over the pace and path of multilateral liberalization. Such growth has also heightened collective action problems within the regime, making it progressively more difficult to conclude new multilateral agreements, monitor members'behavior,and enforce the regime's rules.Forming a PTA com- posed of a small group of members with similar economic interests can help states insure against the adverse consequences stemming from these problems. In addition,the central vehicles used to promote an open global trading system- the periodic multilateral trade negotiations(MTNs)sponsored by GATT/WTO- can prompt members to enter PTAs as a means of guaranteeing they will not be left behind if the MTN stalls and of boosting their bargaining position in the multi- lateral talks.Therefore,states have reasons to establish a PTA during multilateral negotiating rounds.Trade disputes among GATT/WTO members are also likely to influence whether and when states accede to a preferential arrangement.A country embroiled in a GATT/WTO dispute may seek PTAs with third parties in the hopes of improving its leverage in the conflict.Likewise,losing a GATT/WTO dispute can impel a state to form preferential arrangements with third parties to obtain countervailing market access,insurance against future GATT/WTO enforcement failures,or additional bargaining leverage. To test these arguments,we conduct one of the first systematic analyses of PTA formation within GATT/WTO.The evidence strongly supports our claims. Countries are more likely to form a PTA when(1)GATT/WTO membership rises, (2)a multilateral negotiating round is taking place,and (3)they have recently participated in a GATT/WTO dispute,especially when (4)they obtained an unsatisfactory outcome in the dispute.More generally,our results indicate that while 1.See Bhagwati 1993;Bhagwati and Panagariya 1996;Krugman 1993;Lawrence 1996;Mansfield and Milner 1999;Oye 1992;Pomfret 1997;and WTO 1995a

stone of GATT0WTO, PTAs vest each member with preferential access to the other participants’ markets+ Equally surprising is that most preferential groupings are composed of GATT0WTO members+ It is not clear why states form preferential economic blocs when they belong to a successful multilateral regime+ How the spread of PTAs will affect the GATT0WTO system has been widely studied and fiercely debated+ 1 Remarkably little research, however, has addressed how, if at all, the multilateral regime has conditioned the spread of PTAs+ We argue that GATT0WTO has played a large role in stimulating the formation of PTAs+ A central reason why states enter PTAs is to increase their bargaining power+ Preferential arrangements serve this purpose by furnishing states with insurance against the emergence of conditions within GATT0WTO that could threaten their economic interests, as well as by giving states a greater voice in multilateral trade talks and increasing their market power+ Developments within the multilateral regime can create incentives for states to enhance their bargaining power, thereby triggering the establishment of preferential groupings+ These developments include the growth of GATT0WTO membership, which has reduced each participant’s leverage over the pace and path of multilateral liberalization+ Such growth has also heightened collective action problems within the regime, making it progressively more difficult to conclude new multilateral agreements, monitor members’ behavior, and enforce the regime’s rules+ Forming a PTA com￾posed of a small group of members with similar economic interests can help states insure against the adverse consequences stemming from these problems+ In addition, the central vehicles used to promote an open global trading system— the periodic multilateral trade negotiations ~MTNs! sponsored by GATT0WTO— can prompt members to enter PTAs as a means of guaranteeing they will not be left behind if the MTN stalls and of boosting their bargaining position in the multi￾lateral talks+ Therefore, states have reasons to establish a PTA during multilateral negotiating rounds+ Trade disputes among GATT0WTO members are also likely to influence whether and when states accede to a preferential arrangement+ A country embroiled in a GATT0WTO dispute may seek PTAs with third parties in the hopes of improving its leverage in the conflict+ Likewise, losing a GATT0WTO dispute can impel a state to form preferential arrangements with third parties to obtain countervailing market access, insurance against future GATT0WTO enforcement failures, or additional bargaining leverage+ To test these arguments, we conduct one of the first systematic analyses of PTA formation within GATT0WTO+ The evidence strongly supports our claims+ Countries are more likely to form a PTA when ~1! GATT0WTO membership rises, ~2! a multilateral negotiating round is taking place, and ~3! they have recently participated in a GATT0WTO dispute, especially when ~4! they obtained an unsatisfactory outcome in the dispute+ More generally, our results indicate that while 1+ See Bhagwati 1993; Bhagwati and Panagariya 1996; Krugman 1993; Lawrence 1996; Mansfield and Milner 1999; Oye 1992; Pomfret 1997; and WTO 1995a+ 830 International Organization

Multilateral Determinants of Regionalism 831 GATT/WTO has made considerable headway in liberalizing foreign trade,it has also had various unintended consequences.Particularly important is that develop- ments and institutional features associated with the growth of multilateral liberalization-such as rising GATT/WTO membership,MTNs,and active dispute settlement-create incentives for states to seek bilateral commercial arrangements in hopes of obtaining the greatest possible benefits from the multilateral regime. Discrimination in a 'Nondiscriminatory'System The central feature of all PTAs is the special market access that each member grants the other participants.Members set lower trade barriers on goods produced within the preferential grouping than on those produced elsewhere.These institutions-which include agreements that partially liberalize commerce,free trade areas(FTAs),customs unions,and common markets-have dotted the international landscape for centuries,but they have become increasingly pervasive in the past fifty years.Dozens have formed since the conclusion of World War II,and the concentration of trade flows has risen substantially within many PTAs,leading to widespread agreement that these groupings have become key elements of the in- ternational political economy.2 Because PTAs are generally made up of countries located in the same geograph- ical region,the spread of these arrangements has led many observers to conclude that commercial regionalism is on the rise.As shown in Figure 1,two distinct waves of regionalism took place during the second half of the twentieth century.3 The first occurred from the late 1950s through the 1970s;the second occurred in the 1990s. Most PTAs formed since World War II have been composed of parties to GATT and the WTO;and,at present,virtually every WTO member belongs to some type of preferential arrangement.4 From its inception,GATT attempted to regulate these arrangements.Article XXIV of the 1947 General Agreement on Tariffs and Trade- GATT's founding document-stipulates that member-states are permitted to form a PTA only if it eliminates barriers to "substantially all the trade"among its mem- 2.Serra et al.1997,8. 3.See Bhagwati 1993;and Mansfield and Milner 1999. 4.WTO 1995a.In this article,we are only concerned with"reciprocal"PTAs.Nonreciprocal agree- ments,such as the Generalized System of Preferences,are ones in which advanced industrial states unilaterally grant preferential market access to developing countries without requiring any trade con- cessions in return.The consequences for the trading regime are profoundly different than when pref- erences are reciprocal.Ozden and Reinhardt 2003.While virtually every party to the WTO belongs to some PTA,only about half of them belong to a reciprocal PTA,as shown in Figure 2. 5.Provisions for forming PTAs were made at the time of GATT's establishment because it was apparent that this body would be hard pressed to forbid states from doing so.In addition,some deci- sion makers seemed to believe that Article XXIV's requirement that PTAs remove all trade barriers among members would complement GATT initiatives to promote multilateral openness.Bhagwati 1993, 35-36

GATT0WTO has made considerable headway in liberalizing foreign trade, it has also had various unintended consequences+ Particularly important is that develop￾ments and institutional features associated with the growth of multilateral liberalization—such as rising GATT0WTO membership, MTNs, and active dispute settlement—create incentives for states to seek bilateral commercial arrangements in hopes of obtaining the greatest possible benefits from the multilateral regime+ Discrimination in a ‘Nondiscriminatory’ System The central feature of all PTAs is the special market access that each member grants the other participants+ Members set lower trade barriers on goods produced within the preferential grouping than on those produced elsewhere+ These institutions—which include agreements that partially liberalize commerce, free trade areas ~FTAs!, customs unions, and common markets—have dotted the international landscape for centuries, but they have become increasingly pervasive in the past fifty years+ Dozens have formed since the conclusion of World War II, and the concentration of trade flows has risen substantially within many PTAs, leading to widespread agreement that these groupings have become key elements of the in￾ternational political economy+ 2 Because PTAs are generally made up of countries located in the same geograph￾ical region, the spread of these arrangements has led many observers to conclude that commercial regionalism is on the rise+ As shown in Figure 1, two distinct waves of regionalism took place during the second half of the twentieth century+ 3 The first occurred from the late 1950s through the 1970s; the second occurred in the 1990s+ Most PTAs formed since World War II have been composed of parties to GATT and the WTO; and, at present, virtually every WTO member belongs to some type of preferential arrangement+ 4 From its inception, GATT attempted to regulate these arrangements+ 5 Article XXIV of the 1947 General Agreement on Tariffs and Trade— GATT’s founding document—stipulates that member-states are permitted to form a PTA only if it eliminates barriers to “substantially all the trade” among its mem- 2+ Serra et al+ 1997, 8+ 3+ See Bhagwati 1993; and Mansfield and Milner 1999+ 4+ WTO 1995a+ In this article, we are only concerned with “reciprocal” PTAs+ Nonreciprocal agree￾ments, such as the Generalized System of Preferences, are ones in which advanced industrial states unilaterally grant preferential market access to developing countries without requiring any trade con￾cessions in return+ The consequences for the trading regime are profoundly different than when pref￾erences are reciprocal+ Özden and Reinhardt 2003+ While virtually every party to the WTO belongs to some PTA, only about half of them belong to a reciprocal PTA, as shown in Figure 2+ 5+ Provisions for forming PTAs were made at the time of GATT’s establishment because it was apparent that this body would be hard pressed to forbid states from doing so+ In addition, some deci￾sion makers seemed to believe that Article XXIV’s requirement that PTAs remove all trade barriers among members would complement GATT initiatives to promote multilateral openness+ Bhagwati 1993, 35–36+ Multilateral Determinants of Regionalism 831

832 International Organization 407 35 30 20 15 10 5 0 1948-52 1958-62 1953-57 68-72 63-67 1978-82 1973-77 1988-92 1983-87 1993-97 Year Note:Year indicates the date that PTAS entered. FIGURE 1.Number of new reciprocal PTAs notified to GATT/WTO,1948-98 bers and does not "on the whole"increase protectionism against nonmembers.5 Further,the Enabling Clause,which was adopted by GATT in 1979,permits de- veloping countries to furnish preferences to one another through the creation of PTAs that do not adhere to Article XXIV.7 These efforts to regulate the formation of PTAs,however,have met with little success.As Jagdish Bhagwati points out,with respect to such arrangements,the multilateral regime"is so full of holes in its discipline that almost anything goes." Members have been required to notify new preferential groupings to GATT work- ing parties (before 1995)and to the WTO's Committee on Regional Trade Agree- ments(since 1995).These bodies-which assess the degree of compliance by PTAs with GATT/WTO rules-have failed to reach judgment on all but one of the 118 PTAs submitted for review,mostly because of differences among members about 6.See Bhagwati 1993;and WTO 1995b,791. 7.WT01995a,18-19. 8.Bhagwati 1993,44

bers and does not “on the whole” increase protectionism against nonmembers+ 6 Further, the Enabling Clause, which was adopted by GATT in 1979, permits de￾veloping countries to furnish preferences to one another through the creation of PTAs that do not adhere to Article XXIV+ 7 These efforts to regulate the formation of PTAs, however, have met with little success+ As Jagdish Bhagwati points out, with respect to such arrangements, the multilateral regime “is so full of holes in its discipline that almost anything goes+” 8 Members have been required to notify new preferential groupings to GATT work￾ing parties ~before 1995! and to the WTO’s Committee on Regional Trade Agree￾ments ~since 1995!+ These bodies—which assess the degree of compliance by PTAs with GATT0WTO rules—have failed to reach judgment on all but one of the 118 PTAs submitted for review, mostly because of differences among members about 6+ See Bhagwati 1993; and WTO 1995b, 791+ 7+ WTO 1995a, 18–19+ 8+ Bhagwati 1993, 44+ FIGURE 1. Number of new reciprocal PTAs notified to GATT/WTO, 1948–98 832 International Organization

Multilateral Determinants of Regionalism 833 what constitutes compliance.As a WTO staff member observes,"history has proved this to be one of the most unsatisfactory of all GATT procedures."10 Con- sequently,a former GATT Deputy Director General concluded,"Of all the GATT articles,this [Article XXIV]is one of the most abused.[New PTA members]have little fear that they will be embarrassed by some GATT body finding them in vi- olation of their international obligations and commitments and recommending that they abandon or alter what they are about to do." In fact,GATT/WTO members joining a PTA routinely violate Article XXIV. Trade barriers within preferential arrangements are almost never completely elim- inated and members frequently raise trade barriers on nonmembers'products. Germany's average tariff on third parties,for example,nearly doubled after its accession to the European Economic Community in 1958.12 To align with the European Union's (EU)textile and apparel import regime,Turkey increased its quantitative restrictions against outside states after signing an FTA with the EU in 1995.13 Similarly,Mexico,Israel,and the members of the Mercado Comiin del Cono Sur(Mercosur)increased their external trade barriers after joining PTAs.4 Even preferential groupings whose members have not raised their external trade barriers often inflict some damage on third parties,if for no other reason than because the preferential access granted to members'products degrades the com- petitiveness of nonmembers'products within the PTA.15 To be clear,we are not claiming that PTAs generally have been economically harmful.Although the available evidence indicates that some PTAs-especially those composed of developing countries-have had adverse economic conse- quences,various studies conclude that other arrangements-particularly those formed in recent years-have promoted economic welfare.16 Regardless,the wel- fare implications of PTAs do not directly bear on the issues addressed here. Nonetheless,the fact that GATT/WTO has been unable to prevent PTAs from enacting policies that place third parties at a competitive disadvantage in inter- national markets suggests that,contrary to the view of some observers,GATT WTO has not "made the world safe for regionalism."7 Rather,we argue that 9.See Crawford and Laird 2001;Sampson 1996,90;and WTO 1995a,63,and 1999a. 10.Sampson1996,90. 11.WT01995a,63. 12.bid.,47. 13.Hudec and Southwick 1999.72-74. 14.Panagariya 2000,317. 15.See Frankel 1997,112-13;Freund and McLaren 1999:Sapir 2001;and Winters and Chang 2000. 16.See Bhagwati 1993:Bhagwati and Panagariya 1996:Frankel 1997:Panagariya 2000:and Pom- fret 1997.Central to assessing the global welfare implications of a PTA is whether it creates more trade among members than it diverts from efficient producers located outside the arrangement.Viner 1950.However,it should be noted that in addition to this factor,PTAs affect members'welfare by influencing foreign direct investment,the governance of international economic relations,and other issues.See Lawrence 1996;and Yarbrough and Yarbrough 1992. 17.New York Times,19 December 1993,D4

what constitutes compliance+ 9 As a WTO staff member observes, “history has proved this to be one of the most unsatisfactory of all GATT procedures+” 10 Con￾sequently, a former GATT Deputy Director General concluded, “Of all the GATT articles, this @Article XXIV# is one of the most abused+ @New PTA members# have little fear that they will be embarrassed by some GATT body finding them in vi￾olation of their international obligations and commitments and recommending that they abandon or alter what they are about to do+” 11 In fact, GATT0WTO members joining a PTA routinely violate Article XXIV+ Trade barriers within preferential arrangements are almost never completely elim￾inated and members frequently raise trade barriers on nonmembers’ products+ Germany’s average tariff on third parties, for example, nearly doubled after its accession to the European Economic Community in 1958+ 12 To align with the European Union’s ~EU! textile and apparel import regime, Turkey increased its quantitative restrictions against outside states after signing an FTA with the EU in 1995+ 13 Similarly, Mexico, Israel, and the members of the Mercado Común del Cono Sur ~Mercosur! increased their external trade barriers after joining PTAs+ 14 Even preferential groupings whose members have not raised their external trade barriers often inflict some damage on third parties, if for no other reason than because the preferential access granted to members’ products degrades the com￾petitiveness of nonmembers’ products within the PTA+ 15 To be clear, we are not claiming that PTAs generally have been economically harmful+ Although the available evidence indicates that some PTAs—especially those composed of developing countries—have had adverse economic conse￾quences, various studies conclude that other arrangements—particularly those formed in recent years—have promoted economic welfare+ 16 Regardless, the wel￾fare implications of PTAs do not directly bear on the issues addressed here+ Nonetheless, the fact that GATT0WTO has been unable to prevent PTAs from enacting policies that place third parties at a competitive disadvantage in inter￾national markets suggests that, contrary to the view of some observers, GATT0 WTO has not “made the world safe for regionalism+” 17 Rather, we argue that 9+ See Crawford and Laird 2001; Sampson 1996, 90; and WTO 1995a, 63, and 1999a+ 10+ Sampson 1996, 90+ 11+ WTO 1995a, 63+ 12+ Ibid+, 47+ 13+ Hudec and Southwick 1999, 72–74+ 14+ Panagariya 2000, 317+ 15+ See Frankel 1997, 112–13; Freund and McLaren 1999; Sapir 2001; and Winters and Chang 2000+ 16+ See Bhagwati 1993; Bhagwati and Panagariya 1996; Frankel 1997; Panagariya 2000; and Pom￾fret 1997+ Central to assessing the global welfare implications of a PTA is whether it creates more trade among members than it diverts from efficient producers located outside the arrangement+ Viner 1950+ However, it should be noted that in addition to this factor, PTAs affect members’ welfare by influencing foreign direct investment, the governance of international economic relations, and other issues+ See Lawrence 1996; and Yarbrough and Yarbrough 1992+ 17+ New York Times, 19 December 1993, D4+ Multilateral Determinants of Regionalism 833