Reciprocity and the hidden constitution of world trade

Abstract

In common descriptions of the world trading system, MFN and national treatment embody the principle of non-discrimination. Reciprocity is mostly regarded as a remnant of mercantilist trade policy. This paper argues that reciprocity is the more fundamental constitutional rule, because it reflects the unanimity principle enabling countries to identify Pareto-improving changes of trade policy. I reconstruct the implicit constitution of world trade by applying some methodology of positive constitutional economics. A major result is that in the Uruguay round a fundamental constitutional change took place from general reciprocity to “status quo reciprocity”, which entails the possibility of Pareto-deteriorating institutional changes. Copyright Springer Science+Business Media, LLC 2006Positive constitutional economics, WTO/GATT, Reciprocity, Regionalism, MFN, F02, F13,

The paradox of weakness in the politics of trade integration

“…However, most of the studies have approached the issue from a political science angle, either by adopting a general theoretical perspective or by focusing on potential applications, in particular, in the context of EU politics, 1 For an illuminating treatment on why trade policy is an international (political-economy) issue at all from a constitutional political economy perspective see Vanberg (1992). On the (dim) prospects of unilateral trade liberalization in a political economy framework see also Herrmann-Pillath (2006). 2 The KORUS FTA was finally concluded on December 3, 2010.…”