Edited by William A. Kerr and James D. Gaisford
Chapter 7: Overview of Trade Agreements: The Multilateral System
Tim Josling The logic of a multilateral trade system The development of a multilateral trade system is a project that requires political, economic and legal support. Political support has traditionally been provided by hegemonic powers encouraged by a mixture of self-interest and altruism and backed up by political elites in those countries.1 Other countries add their support out of a mix of unwillingness to be sidelined and awareness that the system itself helps to restrain hegemony. Over time the strength of political support can wax and wane, and the composition of the hegemonic alliance can change. The multilateral system can break down if there is critical disillusionment in the hegemonic powers with its value and performance. Alternative systems, including that based on regional trade agreements, tend to be encouraged by weakness at the multilateral level, though in reality these two systems appear to co-exist fairly well.2 Economic support comes from two sources. One is the notion that the provision of rules that reduce transactions cost in international trade is a global public good, that would be underprovided by governments in the absence of multilateral pacts.3 Such global good provision does not require an assumption of altruism, as all can potentially gain, but it does require some leadership and cooperation, to avoid the pitfalls of the prisoners’ dilemma. And the economic beneﬁts are not equally distributed, which may lead to problems of equity. The second economic motive is that of quasi-mercantilist expansion of trade driven by exporters and potential exporters...
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