M1906 - SUGDEN TEXT.indd

One of the most enduring points of confl ict in the global political economy is whether international economic rules and regulations should accommodate diversity or encourage harmonization of regulatory institutions. The logic of diff erentiation is that optimal regulatory design diff ers according to national needs and conditions. The logic of harmonization, in contrast, is that the transaction costs imposed by regulatory diversity impede crossborder investment and trade. Though international economic regimes in the decades following World War II refl ected both the logics of diff erentiation and harmonization, the former largely prevailed. Members of the General Agreement on Tariff s and Trade (GATT), for example, established basic rules and procedures for coordinating ‘trade’ policies, but the issue-area was narrowly defi ned such that countries retained virtually unlimited discretion over national regulatory institutions – even those regulatory arrangements that might aff ect trade fl ows. The logic of diff erentiation was even more evident with regard to developing countries: many were not members of GATT, and those that were received ‘special and diff erential treatment’ (SDT). By exempting developing countries from obligations of reciprocity, for example, poorer countries could undertake activities that were prohibited in the case of wealthier countries (Finlayson and Zacher, 1981; Tussie, 1987). Since the early 1980s, the logic of harmonization has increasingly come to inform international economic regimes. Multilateral trade negotiations have broadened the defi nition of ‘trade’ and introduced international disciplines on a variety of regulatory practices defi ned as ‘trade-related.’ Countries now subject to multilateral supervision not just tariff s and other non-tariff measures that have readily observable eff ects on trade fl ows (so-called ‘border issues’), but also institutional arrangements that deeply