Page 205 - Global Political Economy_Understanding The International Economic Order

CHA PTER S EVEN
that Japan is quite unlikely to become an American-type market
economy.

Harmonization
Another possible solution to the problem posed by national differ-
ences is harmonization. Whereas the theory of economic convergence
assumes that time and the market will lead to a blurring of national
differences, the harmonization approach maintains that eradication
of significant national differences should be an explicit goal of inter-
national negotiations. Many areas of government policies that lend
themselves to harmonization already fall within the province of the
World Trade Organization and other international institutions. The
doctrine of national treatment embodied in the GATT/WTO, for ex-
ample, prohibits discriminatory taxes and regulations to be applied
to foreign firms. The Tokyo, Uruguay, and other GATT Rounds of
trade negotiations have resolved many vexing issues that arise from
cultural, historic, and government regulatory traditions. All these
achievements, however, are only a small steptoward a solution of the
problem.
The first major effort toward negotiated harmonization of national
differences was made in the Tokyo Round of trade negotiations; by
the mid-1980s the concept of reciprocity, or more pointedly, “specific
reciprocity,” had become the principal mechanism employed to
achieve greater harmonization among national systems of political
economy. Under the GATT and, to a lesser extent, under the WTO
system, general reciprocity had been the rule; nations would make
broad concessions to trading partners in exchange for other broad
concessions. Underlying this negotiating tactic was an assumption
that, over time, concessions from one country to another would bal-
ance out, and everyone would benefit from a more open international
economy. Rightly or wrongly, by the mid-1980s the United States
and Western Europe believed that general reciprocity was working
too slowly; the United States in particular believed that its trading
partners (read especially Japan) had failed to carry out the agreements
to which they had committed themselves. Therefore, in place of gen-
eral reciprocity, the United States and Western Europe resorted to a
policy of specific reciprocity under which these nations would not
make any concessions and might even withdraw prior concessions if
the other party did not fulfill its side of the agreement; this position
was the rationale for the 1990s American policy of “managed trade”
toward Japan, in which the United States demanded a percentage of
the Japanese market in automobiles and other products in exchange
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