The United States and trade disputes in the World Trade Organization: Hegemony constrained or confirmed?

Abstract

Abstract and Key Results * Does the World Trade Organization function to reinforce American dominance (or hegemony) of the world economy? We examine this question via an analysis of trade disputes involving the United States. * This allows us to assess whether the US does better than other countries in this judicialised forum: and in so doing enhance the competitive prospects of their firms. * The results are equivocal. The United States does best in the early phases of a dispute, where political power is important. It does less well as the process develops. Key Words World Trade Organization, US Hegemony, Trade Analysis 'One of the main functions of the WTO is to tie the American Gulliver down.' (de Jonquieres 2004, p. 19) Introduction The creation of the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) was regarded by many observers as a key achievement of the Uruguay Round negotiations (Hart 2002, Jackson 1998). The achievement lay in the creation of a rules-based system for resolving trade disputes, where all parties had equal rights and obligations, in preference to the power-based system where the law of the jungle prevailed. In the years since its creation, the DSB has been vastly more active than its GATT predecessor. This has been hailed as proof that the WTO represents a rules-based approach to international trade disputes that helps the weak defend themselves against the strong (Gilpin 2001). Yet, the operation of the disputes process is not without its critics. The losing side in a dispute is required to bring its regulation into conformity with WTO provisions--or face sanctions. Developing states, often reliant on a small number of export products or services for their economic livelihood, are not in a position to appeal against WTO decisions. A more fundamental criticism, one central to this paper, is that the WTO's very rules are not neutral, but reflect hegemony: the dominance of American rules, norms and practices about international commerce. The paper proceeds as follows. First we discuss the concept of hegemony and its utility for understanding international economic relations. In the next section, we develop a methodology designed to gauge the extent to which the US exercises hegemony through the DSB. This is done by analysing US activity in the disputes process and contrasting this with the European Community's experience. (1) This comparison is made to provide a benchmark for assessing American success at the WTO; considering the US in isolation would make it impossible to determine whether it does better in the WTO than other actors. The EC has been selected as it is the second most active WTO member with respect to the DSB process and also the US' primary counterparty. The EC is also very similar in economic and demographic terms: one would expect these parties to have similar experiences with the disputes process. The final section develops some conclusions. Hegemony: Institutions and International Business Antonio Gramsci 'developed the concept of hegemony to describe a condition in which the supremacy of a social group is achieved not only by physical force but also through consensual submission of the very people who were dominated' (Litowitz 2000, p. 518). Hegemony rests on the normative triumph of a particular idea, but this victory is both created and buttressed by the construction of institutions dedicated to the propagation of these dominant values. Thus, power and resource asymmetries are important for understanding how hegemony develops. Institutionalist theory has long understood that the bundle of rules and procedures called institutions are also constituted by norms and values: many so deeply held there is no need to articulate them. This has an important implication for organizations interacting with an institution; 'the exercise of strategic choice may be pre-empted when organizations are unconscious of, blind to, or otherwise take for granted the institutional processes to which they adhere' (Oliver 1991, p. …