Disguised Protectionism and Linkages to the GATT/WTO

Abstract

Member states of the GATT/WTO have linked some issue-areas outside trade to the institution and did so with varying depths. At the same time they have chosen not to link other issue-areas. What accounts for this variation? The author argues that states establish a legalized linkage between the GATT/WTO and an issue-area outside it when they are uncertain about the possibilities of disguised protectionism. Such uncertainty exists under two conditions: when diversity in regulations in an issue-area across states generates a large adverse impact on trade (negative externalities) but that diversity can be justified at the international level for (1) having an independent objective apart from hampering trade and (2) when there are few alternative policies to achieve that objective (legitimacy). States establish a highly legalized linkage in these situations to reduce the uncertainty and minimize disguised protectionism. By contrast, when regulatory diversity exhibits low legitimacy, states establish only a weakly legalized linkage. In the absence of meaningful externalities, they do not establish any linkages. The author evaluates this argument in two ways. He provides an overview of eleven issue-areas about which there have been some debates or conflicts about linkages to the GATT/WTO. In addition, he carries out in-depth case studies of three issue-areas—labor standards, environmental standards, and health safety standards. The findings of this article contribute to a better understanding of international institutions and cooperation as well as of the evolution of the multilateral trade institution.