Bilateral and multilateral cooperation in international trade : a political-economy perspective

There is widespread consensus in the literature on trade cooperation that bilateralism is a deficient form of cooperation compared to multilateralism. This consensus is regularly echoed by warnings from policymakers and the media when negotiations in the multilateral GATT/WTO stagnate. This volume puts these warnings about bilateral cooperation into a historical perspective. Its main goal is to shed light on the role of bilateralism and multilateralism in trade cooperation from 1860 to the present. On the basis of a theory-driven empirical analysis, the volume shows that bilateralism plays an important role in promoting liberalization. Bilateralism renders liberal trade politically feasible on the domestic level because it allows political actors to manage the domestic political costs and benefits that arise from economic actors who lose and win by commercial collaboration. However, bilateralism is not without problems. Concerns about domestic distribution create enforcement problems that might result in a halt or even a reversal of liberalization. These enforcement problems can be eliminated through multilateral cooperation. The downside of multilateralism is, however, that it is impossible to control the domestic political effects of trade cooperation. For these reasons, there is no single best form of cooperation and political actors face a dilemma in institutional choice. In the historical perspective, it can be further shown that bilateralism is more frequently chosen for trade liberalization than multilateralism. This finding indicates that bilateral cooperation is less of a threat to liberal trade than the conventional perspective suggests. The volume makes some suggestions about how an appropriately-equipped WTO could render bilateralism a real alternative to multilateralism.