Using National Economic Power to Pursue Economic and Environmental Goals

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Economic analysis of trade policy has usually sought to explain trade intervention in terms of domestic objectives. Tariffs and quotas, for example, have been seen primarily as a response to protectionist pressures emerging directly from domestic groups perceiving themselves as benefiting from them. But trade policy is increasingly seen as a mechanism for enforcing international economic and environmental agreements. For example, trade sanctions have been threatened as a means of enforcing international debt contracts and punishing nations that violate international environmental protocols. This project rigorously analyzes the ability of national governments to use trade policy as a way of influencing the policies of other sovereign nations. The ability of a government to exert external influence is investigated in the context of theories of dynamic strategic interaction. The focus is not on the development of theoretical methods per se, but on their application to the international economic order. The project assesses the ability of existing multilateral and unilateral arrangements, such as GATT and U.S. trade law, and alternative arrangements to achieve objectives in global environmental protection, trade policy, protection of intellectual property, and international banking. Two specific questions are addressed: (1) Does the cost, in terms of reduced flexibility, of laws constraining the executive's pursuit of foreign policy outweigh any improved commitment vis-a-vis foreign governments that such laws might impart? (2) In the presence of asymmetric information about the national and global costs and benefits of environmental protection, should national environmental protection be rewarded, or should sanctions be imposed against polluters?