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Judith Goldstein on the future of global trade in a populist era

Please note that prior to September 2017, the Center on Global Poverty and Development was known as the Stanford Center for International Development (SCID).

International Maritime Organization
Aug 1 2017

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SCID News

By Kristen Crawford

Are multilateral trade deals dead?

The question, while not new, has become especially urgent as Britain moves to exit the European Union and populist leaders like President Donald Trump join labor and environmental groups in attacking the most ambitious trade agreement in history — the one that established the World Trade Organization.

Judith Goldstein, too, sees flaws in the WTO, which replaced in 1995 an earlier pact that sought to reduce or eliminate trade barriers for all members. The WTO and its predecessor, the General Agreement on Tariffs and Trade, were one of a number of international bodies that emerged from the broad cross-border cooperation that prevailed more than half a century following the World War II.

But Goldstein, the chair of Stanford’s political science department and a SIEPR senior fellow, has a dramatically different take on what ails the WTO and other multi-country trade pacts. “I don’t think multilateralism in trade has ever existed,” she says, “at least not in the way we thought it did.”

Through her research, Goldstein has found that — contrary to what economists and political scientists have long believed — the idea that multilateral deals are negotiated to the benefit of all member countries is false.

Advanced countries tend to dictate terms to their own advantage to an extent scholars were unaware of until a few years ago, when Goldstein helped collect and digitize newly declassified documents on the origins the General Agreement on Tariffs and Trade.

After studying the behind-the-scenes jockeying that led to GATT’s formation in 1947, Goldstein has concluded that the negotiations were, in reality, strikingly bilateral in nature.

“The benefits went mainly to big countries,” says Goldstein, who has recently co-authored a report, “Opening Markets: Rules, Norms and Bargaining in Trade Treaties,” detailing her findings. “For third-party nations that were supposed to benefit without kicking anything in, there was no free lunch.”

Trade negotiations are highly secretive and their details rarely disclosed, even after the fact. The insights into those early GATT negotiations offer invaluable lessons into the dynamics that shape trade treaties.

“The mechanisms behind trade deals are imperfect,” says Goldstein. “Having such great historical detail about how individuals, people and nations fundamentally interact with each other is very rare and tells us that how trade treaties in multilateral settings have been done hasn’t worked very well.” In the last two decades, bilateral trade pacts have been on the rise. There are now roughly 500 of them.

For more than three decades, Goldstein has been fascinated by trade politics — primarily, why leaders think that opening or closing trade borders is good or bad at any particular moment in time and the arguments they use to enact and enforce trade laws.

She’s found that, from at least the 1820s on, political attitudes have fallen into three categories: open trade is good; open trade is bad because it enables other countries to cheat; or, open trade is neither good nor bad as long as it redistributes wealth to the less fortunate.

Goldstein has authored, co-authored and edited six books, including Transatlantic Perspectives on Diplomacy and Diversity in 2015 and The Evolution of the Trade Machine: Politics, Law, and Economics of the GATT and the WTO. Since 2007, she has also been running a public opinion poll reflecting the views of 6,000 Americans on trade, immigration and other foreign policy issues.

After earning a Masters in international affairs from Columbia and a PhD in political science from UCLA, Goldstein joined Stanford’s faculty full-time in 1981. She has led the university’s political science department since 2014.

To Goldstein, GATT was far more effective at promoting global trade than the WTO. Unlike its successor, GATT was largely member-driven: Rules were intentionally ambiguous so as to allow countries to balance competing interests at home with their commitment to trade liberalization.

The WTO offers no such flexibility, she says. Its mandates are more specific, stricter and require that all member nations comply or risk landing in court. In the face of potentially severe repercussions, countries have become reluctant to strike deals. The WTO has yet to produce a single trade agreement.

Even so, Goldstein believes its future lies in its judicial role. To that end, she believes that the organization’s track record to date in holding members accountable when they cheat that has prevented trade wars from erupting even as countries have become more protectionist.

“The WTO is acting more as insurance” against outbreaks of trade disputes, says Goldstein. It will survive — but, just like the ideology behind multiculturalism, not in the way originally envisioned.