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The Post-Cold War Trading System: Who's on First?

The Post-Cold War Trading System: Who's on First? By Sylvia Ostry. Chicago: University of Chicago Press, 1997. 330p. $17.95 paper.

The evolution of the postwar trading system is a "big picture" story that Sylvia Ostry has mastered for good reason. She is one of the handful of experts who not only has written lucidly about the busy interface between trade and domestic politics over the last forty years but also has been a top-level policymaker, first in Ottawa and later at the OECD, and has served in a civic capacity with voluntary high policy, high power trade organizations, such as the Twentieth Century Fund. She cuts a daunting figure in elite circles, and her accomplishments in and command of this multidimensional subject are impressive. Ostry is known as someone with strong--some would say opinionated--views about every aspect of the arcane world of trade, including tariffs, foreign investment, intellectual property rights, TRIPS, TRIMS, nontariff barriers, and, most of all, the exercise of power by national governments and its effect on the world trading order.

Although Ostry cannot claim to be "present at the creation," her insider account of the rise and fall of the postwar trading system is all the more remarkable because of the candor and critical distance she brings to the subject. As a Canadian writing from the margin, she is an insightful student of the contested and often contradictory role of the United States in the postwar order. For anyone who wants to revisit the limitations of "embedded liberalism," in Ruggie's evocative phrase, Ostry's book is first rate, informative, and tightly written.

The starting point is to understand what Ostry calls "system friction" of the liberal trade order, namely, the structural differences in access and trade policy. While she is careful not to put the blame on any single factor, much of her account consists of a prolonged examination of the root causes of this built-in asymmetry in market organization, the shortcomings in liberal ideology, and divergent state policy of the leading industrial powers. She argues convincingly that at first the United States was able to construct the postwar consensus because it shared with its European partners and Japan a common commitment to stable markets, gradual trade liberalization, a strong social safety net, and a large proactive role for the state domestically and internationally. In the golden age, international rules were compatible with domestic objectives.

This consensus dissolved and eventually collapsed in the mid-1980s as U.S. leadership was increasingly contested not only by Japan but also by powerful domestic coalitions who played a pivotal role in shaping U.S. trade politics through the Congress. As the U.S. position has been challenged from both without and within, the once mighty liberal trading order has not been able to find its solid moorings again. Uncle Sam, Ostry argues, is not up to the task of either providing the leadership or the ideas to construct the world trading order so that domestic and international objectives of countries are mutually reinforcing rather than, as is so often the case, at loggerheads.

The best-researched parts of the book are those dealing with the postwar construction of the liberal trading order, with all the compromises and loopholes that were part of GATT; the structural impediments and challenges that created so many asymmetries in the grand liberal design; the tough-minded analysis of the new protectionism of the 1980s and the use and abuse by the United States of its own trade rules; and the contested framework of deeper integration at the regional and international level more recently in the 1990s. There is a lot of friction in the system, and Ostry is skeptical that, despite the many accomplishments of the Uruguay Round and the organization of the WTO, the international trading system will have the capacity to ensure that the post-Cold War trading system survives.

One danger facing the world trading system is the threat that unilateral initiatives taken by powerful state and private actors will replace multilateralism as best practice. Increasingly, the United States wants this kind of two-tier system to accommodate its domestic interests. Ostry puts herself in the camp of the trade skeptics because the spread of unilateralism is incompatible with a rules-based order, and the politicization of trade threatens to destabilize the world trading system. But she is under no illusions that multilateralism has a secure future under a regime of global free trade. It used to be that the success of the liberal trading order depended on embedding multilateral rules and that these were complied with most often on a quasivoluntary basis. Ostry makes innovative use of Albert O. Hirschman's (Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States, 1970) exit and voice to explain that any stable international order that is based on a smaller role for govern ment and that rewards the large transational actors at the expense of social cohesion cannot be sustainable in the long run.

The trade agenda has evolved in so many ways beyond the conventional definition of trade to include technology, investment, and social and cultural policy, and it is this huge unwieldy trade agenda that many governments perceive as a threat to domestic needs and opportunities. For Ostry, the redesign of the postwar welfare state constitutes the great divide of our times and removes a principal stabilizing force in support of an equitable international order. For this important reason, she tells a compelling story with prescient lessons for today.
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Title Annotation:Review
Author:Drache, Daniel
Publication:American Political Science Review
Article Type:Book Review
Date:Dec 1, 1999
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