US national power and the post-war trading regime

Judith Goldstein and Joanne Gowa

World Trade Review, 2002, vol. 1, issue 2, 153-170

Abstract: This essay examines the effect of power asymmetries and imperfect markets on US trade policy, two issues often neglected in the conventional literature. We suggest that when the distribution of power is skewed and markets do not conform to the world of standard trade theory, open international markets will not exist unless the disproportionately most powerful state can make a credible commitment to free trade. We suggest that these two conditions characterized the post-World War II trade environment and partially explain why the United States encouraged the formation of the postwar international trade regime. To demonstrate this argument, we examine the voting rules, dispute settlement procedures, and regional trading arrangements that characterized the three postwar trade organizations: the stillborn International Trade Organization, the General Agreement on Tariffs and Trade, and the World Trade Organization. We argue that the rules of these institutions empowered their member states to punish any US attempts to ‘cheat’. In so doing, it made free trade their welfare-maximizing strategy choice.

Date: 2002
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