Formuch of the Cold War period the United States often overlooked, and even encouraged, excessive violations of the doctrine of economic liberalism by the Japanese. At the time we felt that the security we gained from a strong, communist-resistant Japan was worth the economic sacrifices that we were forced to make. During this period the United States was the major champion of free trade between nations. Yet, according to Stephen Krasner in his essay, "American Policy and Global Economic Stability," in the case of Japan we allowed them to impose protectionist actions so as to allow for their new industries to develop as well as ease hardship that resulted from the decline of old industries.
However, with the demise of the Soviet security threat, American policy has moved towards one of self interest. Perhaps this is best evidenced by the actions taken last week when the United States government imposed a 100 percent import tariff on Japanese luxury cars. As if this didn't already confuse international relations enough, the sanctions that the United States presented seem to be in violation of the General Agreement on Tariffs and Trade (GATT). Thus it would seem that a potential remedy that the Japanese may seek is to appeal to the World Trade Organization. When asked about the situation, W.T.O. head Renato Ruggiero was quoted in the New York Times on May 17 as offering a "veiled threat" when he said: "I expect both parties to abide by the W.T.O. rules and procedure, which they know well."
All of this seems to indicate that should the Japanese choose to seek remedy through the W.T.O., they would win a decision. This would leave the U.S. with an important choice. Either we could conform to the W.T.O.'s ruling and back down or we could defy the organization and refuse to comply. Just the fact that the U.S. may even consider defying the ruling of the international organization is reflective of a central problem of international institutions that pursue collective goods. Should the U.S. refuse to comply with the W.T.O.'s ruling, there is not much that the body could do to force our compliance.
However, for the United States, non-compliance would be costly, even if these costs don't stem from a "W.T.O. police" so to speak. The W.T.O. is the successor to GATT as the supposed monitor of international trading practices. This idea can be traced all the way back to the failed International Trade Organization of The Havana Charter in the 1940s. Leading the charge for the original I.T.O. and more recently the W.T.O. has been the United States. Thus the importance of American compliance for the future of this, and any other future trading organization, becomes quite understandable. This would be the first time that the United States would come into conflict with the W.T.O. We championed the organization so as to force nations to comply with the doctrines of free trade. So, if the W.T.O. rules that the U.S. has violated the notions of free trade and we refuse to comply, what sort of message does that send to the rest of the world?
Essentially it would tell them that we, the U.S., created this organization to sanction any nation that hurts the process of free trade, except of course when that nation is us. It seems fair to assume that U.S. non-compliance would essentially destroy the credibility of the W.T.O. and certainly not encourage other nations to adhere to any future rulings by the organization. At the same time, if the U.S. were sanctioned by the W.T.O. and we accepted the punishments it would be a major shot in the arm for the specific institution as well international collective action organizations in general.
None of this is designed to say that the United States should definitely accept the W.T.O.'s ruling. That is a decision that must be made after careful calculation of a multitude of both domestic and international political considerations as well as economics. Those considerations are far beyond the scope of this piece. What is important to realize right now, is that whatever the U.S. decision on this issue may turn out to be, it is perhaps a larger signal as to how serious the United States is about promoting international collective action groups. In addition, this decision may go a long way to determining the American role as world leader in the coming years.