International Political Economy: Politics and the Design of Commercial Agreements

Transcription

1 International Political Economy: Politics and the Design of Commercial Agreements Robert Gulotty Department of Political Science University of Chicago PKU-UChicago Summer Institute 2014

2 Outline of Talk 1 Teaching International Political Economy The scope of IPE Typical syllabus Current themes in IPE 2 Cooperative Trade Institutions Japan Case Study of Hidden Protection 2

3 The scope of IPE What is International Political Economy? The relationship between international economics and politics. 3

4 The scope of IPE What is International Political Economy? The relationship between international economics and politics. International economics: International trade in goods, capital, services, migrants, and ownership. 3

5 The scope of IPE What is International Political Economy? The relationship between international economics and politics. International economics: International trade in goods, capital, services, migrants, and ownership. Indirect effects: tax competition, environmental policy, labor policy. 3

6 The scope of IPE What is International Political Economy? The relationship between international economics and politics. International economics: International trade in goods, capital, services, migrants, and ownership. Indirect effects: tax competition, environmental policy, labor policy. Politics: Interests: political survival, individual ideology, class interests. Policies: tariffs, regulations, nationalization, default, monetary policy. Institutions: bilateral trade agreements, customary international law, colonial powers. 3

7 The scope of IPE Competing definitions of Political Economy The relationship between economics and politics. 4

8 The scope of IPE Competing definitions of Political Economy The relationship between economics and politics. The importation of economic tools to study political phenomena. (optimization, general equilibrium, game theory, dynamic programming) 4

9 The scope of IPE Competing definitions of Political Economy The relationship between economics and politics. The importation of economic tools to study political phenomena. (optimization, general equilibrium, game theory, dynamic programming) The use of material interests to explain social phenomena. 4

10 The scope of IPE International economic markets politics 5

11 The scope of IPE International economic markets politics The effects of international economic markets on politics. 5

12 The scope of IPE International economic markets politics The effects of international economic markets on politics. Domestic politics: redistributive consequences of markets - Stolper Samuelson; trilemma. 5

13 The scope of IPE International economic markets politics The effects of international economic markets on politics. Domestic politics: redistributive consequences of markets - Stolper Samuelson; trilemma. International politics: consequences of global shocks s in Europe; IMF lending. 5

14 The scope of IPE International economic markets politics The effects of international economic markets on politics. Domestic politics: redistributive consequences of markets - Stolper Samuelson; trilemma. International politics: consequences of global shocks s in Europe; IMF lending. The effects of politics on international economic markets. Domestic politics: the role of preferences and domestic political institutions on openness - Democratic commitment to investors. 5

15 The scope of IPE International economic markets politics The effects of international economic markets on politics. Domestic politics: redistributive consequences of markets - Stolper Samuelson; trilemma. International politics: consequences of global shocks s in Europe; IMF lending. The effects of politics on international economic markets. Domestic politics: the role of preferences and domestic political institutions on openness - Democratic commitment to investors. International politics: How does the system of states shape market. - Effects of borders; Power politics and trade 5

16 Typical syllabus Typical Syllabus Part I: Theory Foundations of IPE E.E. Schattschneider Politics, Pressures and the Tariff 1935 Albert Hirschman National Power and the Structure of Foreign Trade 1945 Modeling Cooperation: Fearon Bargaining, Enforcement and International Cooperation. IO McGillivray and Smith Trust and Cooperation through Agent Specific Punishments. IO International Institutions: Koreomenos, Lipson, Snidal The Rational Design of International Institutions IO Bagwell and Staiger 2002 The Economics of the World Trading System MIT Press. 6

17 Typical syllabus Syllabus Part II: Trade Trade - Domestic Politics Domestic Preferences Rogowski 1987 Political Cleavages and Changing Exposure to International Trade APSR Hainmueller and Hiscox 2006 Learning to Love Globalization IO Domestic Institutions Milner and Kubota Why the Move to Free Trade? Democracy and Trade Policy in Developing Countries. IO Park and Jensen Electoral Competition and Agricultural Support in OECD Countries. AJPS International Power and Institutions Krasner State Power and the Structure of International Trade. World Politics Goldstein, Rivers and Tomz Institutions in International Relations: Understanding the Effects of the GATT and WTO on World Trade. IO 7

18 Typical syllabus Syllabus Part III: Investment Foreign Direct Investment Domestic Preferences Pinto The Politics of Investment. Partisanship and the Sectoral Allocation of Foreign Direct Investment Economics and Politics Pandya Labor Markets and Demand for Foreign Direct Investment. IO Domestic Institutions Li 2009, Democracy Autocracy and Expropriation of Foreign Direct Investment. Comparative Political Studies. International Power and Institutions Büthe and Milner The Politics of Foreign Direct Investment into Developing Countries; Increasing FDI through International Trade Agreements. AJPS 8

19 Current themes in IPE Some areas of Active Research in IPE Domestic Preferences: Exploring firm level data and New New theories of trade with lobbying. Testing behavioral theories with experimental behavioral evidence. Using text as data. International Institutions: WTO+ Environment? Development? The role of uncertainty in international institutional design. IPES 9

20 10 Cooperative Trade Institutions International Institutions States use international institutions - explicit arrangements, negotiated among international actors - to make cooperation more feasible and durable. (Koremenos, Lipson and Snidal 2001 IO).

21 10 Cooperative Trade Institutions International Institutions States use international institutions - explicit arrangements, negotiated among international actors - to make cooperation more feasible and durable. (Koremenos, Lipson and Snidal 2001 IO). Why do states need institutions?

22 10 Cooperative Trade Institutions International Institutions States use international institutions - explicit arrangements, negotiated among international actors - to make cooperation more feasible and durable. (Koremenos, Lipson and Snidal 2001 IO). Why do states need institutions? Governments can enact policies, like tariffs, that harm other states.

23 10 Cooperative Trade Institutions International Institutions States use international institutions - explicit arrangements, negotiated among international actors - to make cooperation more feasible and durable. (Koremenos, Lipson and Snidal 2001 IO). Why do states need institutions? Governments can enact policies, like tariffs, that harm other states. Left on their own governments will set policies inefficiently from a global perspective.

24 10 Cooperative Trade Institutions International Institutions States use international institutions - explicit arrangements, negotiated among international actors - to make cooperation more feasible and durable. (Koremenos, Lipson and Snidal 2001 IO). Why do states need institutions? Governments can enact policies, like tariffs, that harm other states. Left on their own governments will set policies inefficiently from a global perspective. Institutions help governments reduce this mutual harm.

25 11 Cooperative Trade Institutions Design features of International Institutions Membership Scope of issues covered Centralization of tasks Rules for controlling the institution Flexibility of arrangements.

26 12 Cooperative Trade Institutions Design features of International Institutions Membership Scope of issues covered Centralization of tasks Rules for controlling the institution Flexibility of arrangements.

27 13 Cooperative Trade Institutions Regulatory Protection and Trade Cooperation Regulatory barriers to trade are the principal barrier to trade. Regulations can serve public policy demands or disguised protectionism. Number of Measures China Germany Japan United States TBT STCs year Applied Tariffs

28 14 Cooperative Trade Institutions Institutional Design of the GATT/WTO System GATT Institutional Features: Most Favored Nation - Article I Reciprocity In Market Access - Art. XXIII, Art. XXVIII Flexibility: DSB, Antidumping Art. VI, Escape Clause Art. XIX

29 14 Cooperative Trade Institutions Institutional Design of the GATT/WTO System GATT Institutional Features: Most Favored Nation - Article I Reciprocity In Market Access - Art. XXIII, Art. XXVIII Flexibility: DSB, Antidumping Art. VI, Escape Clause Art. XIX Multilateral Standards Agreements National Treatment - Art. III Tokyo Round Standards Code (Technical Barriers to Trade Agreement) Uruguay Round Technical Barriers to Trade and Sanitary and Phytosanitary Agreements

30 Teaching International Political Economy Japan Case Study of Hidden Protection Hidden Protection after the Tokyo Round Standards Code Japanese Ambassador to the GATT, Masao Sawaki signing the Tokyo Round Procès-Verbal on April 12,

31 16 Japan Case Study of Hidden Protection Disguised Protectionism The Consumer Products Safety Association of Japan introduced SG to take into account the specific skiing conditions in Japan. The US, EC, and Switzerland case in the GATT: SG is disguised protectionism, fails to follow international standards and is not supported by the scientific evidence.

32 17 Japan Case Study of Hidden Protection Institutional Features of WTO Standards Agreements Legal preference (SPS, TBT) for international standards set a range of acceptable behavior. Member States may determine their own appropriate level of protection, even up to the elimination of risk. To go beyond international standard, governments must spend money on scientific evidence for their regulation.

33 18 Japan Case Study of Hidden Protection Institutional Weakness? The lack of well defined international standards at the WTO could mean that it was a failed agreement. These loopholes might be a sign of the limits of international law in sensitive areas -food, safety, health.

34 18 Japan Case Study of Hidden Protection Institutional Weakness? The lack of well defined international standards at the WTO could mean that it was a failed agreement. These loopholes might be a sign of the limits of international law in sensitive areas -food, safety, health. How might we explain these apparent weaknesses in the agreement?

35 19 Japan Case Study of Hidden Protection Modeling the WTO Standards Agreement We can use models of private information to explain these institutional choices. If governments were unbiased, communication efficient cooperation. However, in the presence of private information about preferences, governments cannot be trusted to merely announce their preferred policy. Governments can be incentivized by threat of permanent defection more easily when they can buy temporary allowances.

36 20 Japan Case Study of Hidden Protection Takeaway Points IPE is a growing and vibrant field of international relations. Many of the issues that affect conflict are also relevant for economic relations. There is room to grow.