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Reciprocity in trade: the utility of a bargaining strategy

Published online by Cambridge University Press:  22 May 2009

Carolyn Rhodes
Carolyn Rhodes
Affiliation:
Assistant Professor of Political Science at Utah State University, Logan.
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Abstract

Recent works in international relations theory have focused on the value of reciprocity as a means of achieving cooperation in international politics. They argue that even in an anarchic setting in which self-help typifies the behavior of sovereign nation states, the strategy of matching comparable responses to the actions of other nations may educate them over time to cooperate. This article empirically confirms that this assumption is correct. It examines the use of flexible reciprocal bargaining strategies between the United States and its major trading partners in key sectors in which surplus capacity and domestic adjustment difficulties have made commercial conflicts apparent. The outcomes of most of the disputes demonstrate that reciprocity is an effective means of eliciting cooperation from trading partners. Results also illustrate that this cooperation is usually consistent with the General Agreement on Tariffs and Trade (GATT) norms of liberal trade and dispute settlement, even when it is inconsistent with the GATT principle of nondiscrimination.

Type
Articles
Information
International Organization , Volume 43 , Issue 2 , Spring 1989 , pp. 273 - 299
Copyright
Copyright © The IO Foundation 1989

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References

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2. Article 1 of GATT commits all signatories to the principle of equal treatment via the unconditional most-favored-nation clause. Yet the Preamble to GATT pledges signatories to pursue balanced, mutually acceptable arrangements. Other provisions allow specific retaliatory and compensatory actions. For a thorough analysis of this inherent set of contradictions, see Rhodes-Jones, Carolyn, “The Reciprocity Dilemma: U.S. Trade Policy, Retaliation and the GATT Regime,” Ph.D. diss., Brandeis University, 1987, chap. 5Google Scholar.

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9. John Ruggie developed the concept of “embedded liberalism” to explain American trade policy and GATT. This term aptly describes the persisting American normative view. See Ruggie, John Gerard, “International Regimes, Transactions and Change: Embedded Liberalism in the Postwar Economic Order,” in Krasner, Stephen D., ed., International Regimes (Ithaca, N.Y.: Cornell University Press, 1983)Google Scholar.

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15. For example, Article 19 of GATT, which allows emergency import protection under certain circumstances, provides that affected trading partners may obtain compensation through negotiated arrangements or through unilateral action if negotiations fail. This principle is upheld as well by the “nullification or impairment” provision of Article 23. In instances of dumped or subsidized exports, duties that remove the unfair pricing advantage may be legally applied in retaliation under Articles 6 and 16. See GATT, Basic Instruments and Selected Documents (BISD) I (Geneva: 1952), Articles 6, 16, 19, and 23Google Scholar.

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21. Although the individual members of the EC are the GATT contracting parties, the EC represents their interests collectively with other contracting parties in most cases.

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23. There is one exception to this generalization: the U.S.–Canada automobile trade dispute of the early 1960s took place under very different market conditions. The automobile sector has since been a classic example of surplus capacity.

24. Rhodes-Jones, “Reciprocity Dilemma,” chaps. 6–8.

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27. Ibid., p. 333.

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30. See Official Journal of the European Community, entry no. L307/12, for a letter from Commerce Secretary Baldridge to Minister Davignon on 21 October 1982 which includes verbatim the same assurance. See also entry no. L307/26. The Official Journal is deposited with the Delegation of the Commission of the European Communities, Washington, D.C.

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39. See footnote 20 above.

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43. Ibid.

44. Ibid.

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47. Stedman, , “Canada–U.S. Automotive Agreement,” p. 181Google Scholar. A GATT waiver was obtained by the United States to enter into this preferential arrangement with Canada. Canada required no waiver, since it agreed to offer the same opportunity to any other exporters willing to undertake the required investment in Canadian production.

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52. The Economist, 5 April 1986, p. 54.

53. While the administration pledged the United States to a policy of matching subsidy for subsidy, it also has promised a policy based upon full reliance on market competition to allow prices to find their “natural” level. The development of this latter policy is largely in response to the unexpected costs of agricultural support programs under this administration at a time when the size of the federal budget deficit is an increasing political liability.

54. Recent reports from the EC indicate that more than defensiveness is behind statements about agricultural reform. The reduction of price supports in both dairy and beef production is cited as evidence of a commitment to broaden the effort to wheat and wheat products. See Europe, June 1987, p. 15.