In a time of trade wars, free trade skepticism, tech rivalry, and multipolar disorder, the European Union (EU) cannot evade its responsibilities the last defender of the World Trade Organization (WTO). Yet, it raises the question of whether the EU has power to defend the WTO. The EU is a multilateralist-oriented power of global magnitude. Unlike the United States, the EU is openly defending the WTO in the current crisis created by continued refusal to appointment WTO Appellate Body members. Like the United States, the EU is concerned with the illegitimate trade practices of China. Yet, the EU uses diplomatic pressure on China within the rules of the WTO. The EU is actively trying to rescue the rule-based trade system. Yet, it cannot do so alone. It needs support, not just form other WTO members but also from within Europe itself. The current crisis is in part rooted in the inability of the WTO members to update the WTO rulebook. The focus will be on the potential clash between a more assertive EU on sustainability and the absence of updated WTO rules on sustainable trade issues. This may force the EU to confront a deep-rooted policy dilemma. The question is whether the EU should continue to refrain from using its market power to promote sustainable trade in respect of the WTO. As the EU is about to ratify several bilateral trade agreements of commercial, geo-economic, and indeed geo-political importance, such as the EU–Mercosur or EU–Vietnam agreements, the rule-orientation of the EU faces growing domestic opposition as well as external contestation. Furthermore, the EU is modernizing its trade defense weaponry, the antidumping instrument, and has recently declared its intent to impose unilateral climate-related trade policy measures, the carbon-adjustment tariff, in the future. Thus, an incident such as the burning of the Amazon forest may force the EU to take a tougher stance on sustainability at the risk of bringing the EU on a collision course with the WTO itself, its rules, process, and member states. Consequently, the complex setup of the EU as a trade power could make it difficult to ratify WTO-compatible trade agreements in the future.
Jens Ladefoged Mortensen
Lisa L. Martin
In a comparison of today’s global political economy with that of the last great era of globalization, the late nineteenth century, the most prominent distinction is be the high degree of institutionalization in today’s system. While the nineteenth-century system did have some important international institutions—in particular the gold standard and an emerging network of trade agreements—it had nothing like the scope and depth of today’s powerful international economic institutions. We cannot understand the functioning of today’s global political economy without understanding the sources and consequences of these institutions. Why were international organizations (IOs) such as the World Trade Organization (WTO) or International Monetary Fund (IMF) created? How have they gained so much influence? What difference do they make for the functioning of the global economy and the well-being of individuals around the world? In large part, understanding IOs requires a focus on the tension between the use of power, and rules that are intended to constrain the use of power. IOs are rules-based creatures. They create and embody rules for gaining membership, for how members should behave, for monitoring, for punishment if members renege on their commitments, etc. However, these rules-based bodies exist in the anarchical international system, in which there is no authority above states, and states continue to exercise power when it is in their self-interest to do so. While states create and join IOs in order to make behavior more rule-bound and predictable, the rules themselves reflect the global distribution of power at the time of their creation; and they only constrain to the extent that states find that the benefits of constraint exceed the costs of the loss of autonomy. The tension between rules and power shapes the ways in which international institutions function, and therefore the impact that they have on the global economy. For all their faults, international economic institutions have proven themselves to be an indispensable part of the modern global political economy, and their study represents an especially vibrant research agenda.
Kerry A. Chase
Government policies to protect and promote national culture are a perennial issue in the trading system. Controversy over trade and culture, in almost every instance, swirls around entertainment media—mainly movies, television, video, and music. The object of contention is that many states employ an assortment of financial, trade, and regulatory measures to subsidize locally produced entertainment, restrict imports, and favor national content over foreign content. Such measures often impede trade, pitting commercial interests in open markets and free choice against calls for state action to mitigate trade’s social repercussions. Differing perspectives on the motives behind these policies typify disputes over trade and culture. In one view, state regulation of entertainment media is cultural policy, an essential means of preserving a nation’s identity, culture, and way of life. From another vantage point, these policies are backdoor protectionism, a handout to local business and labor under the guise of cultural preservation. The problem of trade and culture therefore raises basic questions about politics: Why do states subsidize production and restrict imports? What drives political demands for trade protection and government aid? How can variation in policy responses be understood? In the World Trade Organization (WTO), disputes over trade and culture center on two related issues. The first is inclusion of a “cultural exception” in trade rules to green-light, on cultural grounds, state actions that interfere with trade in entertainment media. Although there is no cultural exception in the WTO, pressure to accommodate the “specificity” of entertainment media as a cultural phenomenon has complicated trade negotiations and at times required give and take to placate the opposing sides. The second issue is policy liberalization in entertainment media, which has lagged behind market opening in many other goods and services. Deadlock over trade and culture has inspired some WTO members to explore other options: the European Union (EU) and Canada spearheaded the push for a Convention on Cultural Diversity, and the United States has pursued policy liberalization in a series of free trade agreements. Important political questions again crop up: Why has culture stalemated the WTO, and why haven’t trade linkages like those for health safety standards been institutionalized for trade and culture? Why do international political alignments on this problem form as they do? What explains the design of trade rules for entertainment media, and what is the trade regime’s impact on state policy? The age-old conflict over trade and culture continues to play out and shows no signs of abating.
The World Trade Organization (WTO) dispute settlement system is its judicial arm and enforcement mechanism, designed to assist members in resolving trade disputes that arise between them. Its design reflects a move toward greater legalization in trade governance under the multilateral trade regime. Compared with the dispute settlement system of its predecessor, the General Agreement on Tariffs and Trade (GATT), the WTO’s dispute settlement provided a more structured and formal process with clearly defined stages and more discipline in the timetable of the dispute so as to resolve trade disputes as efficiently as possible. Most important, the WTO’s dispute settlement provides for virtually automatic adoption of panel rulings: a respondent losing a case can block the adoption only if it can persuade all members of the WTO not to do so. The legal basis for the WTO’s dispute settlement system is the Dispute Settlement Understanding (DSU), which provides the principles and procedures by which members may bring their trade disputes to the multilateral trade regime for resolution. Overseeing the dispute settlement process is the Dispute Settlement Body (DSB), which consists of all WTO members and meets regularly to receive and to adopt reports of disputes at their various stages of progress. How effective is the WTO’s dispute settlement mechanism? Effectiveness can be conceptualized as success in attaining the objectives of the dispute settlement under the WTO in three areas: the efficiency of dispute settlement; inclusiveness of the dispute settlement process, especially as it concerns developing country participation; and compliance with legal obligations resulting from arbitration. The existing scholarship on this topic features key debates and frontiers for future research on firms and global production networks/value chains that have the potential to advance our state of knowledge concerning this “crown jewel” of the multilateral trade regime.