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Vanderbilt Law Review

Chris Brummer

First Page

1349

Abstract

A revolutionary shift in international cooperation is underway. Many governments, frustrated with dissension hampering multilateral trade reform at the World Trade Organization ("WTO"), are now turning to bilateral and regional treaties to forward their commercial interests.1 Under these agreements, which rocketed from fewer than 390 in 1989 to more than 2,400 today,2 states have relinquished key aspects of their economic sovereignty to participate in two-party pacts and regional trade clubs like the North American Free Trade Agreement ("NAFTA") and the European Union ("EU"). As a result of such cooperation, most countries no longer may levy tariffs easily, subsidize their domestic industries, or expropriate foreign investment without compensation. Instead, states are increasingly bound by what some commentators describe as a "spaghetti bowl"3 of side arrangements and special commitments that restrict their ability to extract rents from participants in their economic alliances.

Though academics have occasionally discussed whether regional and bilateral instruments threaten the hegemony of the multilateral trading system, they have paid no attention to equally important tensions arising between regional and bilateral agreements themselves. Instead, scholars almost universally have treated bilateral and regional agreements as functionally indistinguishable. This Article argues, however, that bilateral instruments comprise a distinct and important mode of cooperation that at times operates inconsistently with the aims of some regional organizations and their members. In addition to seriously undermining the collective bargaining efforts of regional organizations, bilateral agreements potentially alter the economic relations between an organization's stronger and weaker members. Generally, stronger countries in regional organizations are positioned to craft internal and external regional policies that protect their own sensitive markets while liberalizing those of weaker members. Bilateralism unsettles this arrangement by granting smaller states opportunities to leverage relationships with outsiders and at times liberalize their markets in ways more economically favorable than those available regionally.

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