1. Seven rounds of negotiations have been completed to date. The last round was the Tokyo Round, which was concluded in 1979. An eighth round, the Uruguay Round, was launched in August 1986 and is still in progress. For information on the Tokyo Round, see Glick, Leslie, Multilateral Trade Negotiations: World Trade After the Tokyo Round (Totowa, N. J.: Rowman & Allanheld, 1984)Google Scholar; and Winham, Gilbert, International Trade and the Tokyo Round Negotiation (Princeton, N. J.: Princeton University Press, 1986)Google Scholar. For information on the Uruguay Round, see Aho, C. Michael and Aronson, Jonathan D., Trade Talks: America Better Listen! (New York: Council on Foreign Relations, 1985)Google Scholar; Finger, J. Michael and Olechowski, A., eds., The Uruguay Round: A Handbook for the Multilateral Trade Negotiations (Washington, D. C.: World Bank, 1987)Google Scholar; and Hufbauer, Gary and Schott, Jeffrey, Trading for Growth: The Next Round of Trade Negotiations (Washington, D. C.: Institute for International Economics, 1985)Google Scholar.

2. There are numerous studies estimating the effects of various types of liberalization of tariffs and nontariff measures, both globally and by sector. Agriculture, in particular, has been the focus of an immense amount of research. Models have been based on partial or general equilibrium approaches. For a recent study of Uruguay Round liberalization options, see Alan V. Deardorff and Robert M. Stern, “Alternative Scenarios for Trade Liberalization,” Discussion Paper no. 217, Research Seminar in International Economics, University of Michigan, Ann Arbor, July 1988. Studies on the Tokyo Round include the following: Cline, William R. et al. Trade Negotiations in the Tokyo Round (Washington, D. C.: Brookings Institution, 1977)Google Scholar;Deardorff, Alan V. and Stern, Robert M., The Michigan Model of Production and Trade (Cambridge, Mass.: MIT Press, 1986)Google Scholar; and United Nations Conference on Trade and Development, Assessment of the Tokyo Round of Multilateral Trade Negotiations (New York: United Nations, 1982)Google Scholar.

3. The outcome of noncooperative behavior is often assumed to be a Nash equilibrium. Here, it is assumed that given the actions of all other nations, each nation will act to maximize its own objectives. Prisoner's dilemma is a model of such a situation. Cooperative outcomes are usually defined to be Pareto-optimal—that is, no party can gain without another party losing.

4. Prior to and during an MTN, the national authorities, industries, and bureaucracies will be engaged in a domestic negotiation to determine interests, priorities, and possible trade-offs. It is this work that leads to the establishment of the agenda.

5. In the case of tariff negotiations, barter is less of a constraint, since the effect of trades can be expressed in quantitative terms. However, there is still no generally accepted medium of exchange.

6. See Tollison, Robert and Willett, Thomas, “An Economic Theory of Mutually Advantageous Issue Linkages in International Negotiations,” International Organization 33 (Autumn 1979), pp. 425–49CrossRefGoogle Scholar; and Sebenius, James K., “Negotiation Arithmetic: Adding and Subtracting Issues and Parties,” International Organization 37 (Spring 1983), pp. 281–316CrossRefGoogle Scholar. Note that even if crossissue linkage is not necessary to achieve agreement, it may be fruitful in terms of increasing mutual gains.

7. As noted by Tollison and Willett, this requires that agents agree on the nature of the set of Pareto-optimal outcomes. This will be a function of the availability of information. The less information agents have about the issues, the “fuzzier” the Pareto-optimal set will be. See Tollison, Robert D. and Willett, Thomas D., “Institutional Mechanisms for Dealing with International Externalities: A Public Choice Perspective,” in Amacher, Ryan and Sweeney, Richard, eds., The Law of the Sea: U. S. Interest and Alternatives (Washington, D. C.: American Enterprise Institute, 1976), pp. 97–100Google Scholar.

8. This is also the case in the ongoing Uruguay Round, which was launched in 1986 by a declaration that established fourteen subjects for negotiation. The following procedural constraint was imposed: “Balanced concessions should be sought within broad trading areas and subjects to be negotiated in order to avoid unwarranted cross-sectoral demands.” See Finger, and Olechowski, , The Uruguay Round, p. 237Google Scholar; emphasis added.

9. From a practical political perspective, the term “reciprocity” has traditionally been used in the sense of a balance of gains and concessions. In both the U. S. and Economic Community (EC) context, reciprocity is currently used in the sense of attainment of a “level playing field” and equivalent market access. In this article, I follow the more traditional interpretation. For more information on various interpretations of the term, see Keohane, Robert O., “Reciprocity in International Relations,” International Organization 40 (Winter 1986), pp. 1–27CrossRefGoogle Scholar and Winters, Alan L., “Reciprocity,” in Finger, and Olechowski, , The Uruguay Round, pp. 45–51Google Scholar.

10. In only a few cases can an NTM be converted into a tariff equivalent, such as the producer subsidy equivalent or the effective rate of assistance. The problem of quantification is discussed further in a subsequent section of this article.

11. As noted above, the Uruguay Round declaration appears to actively discourage cross issue linkage attempts.

12. I owe this term to an anonymous referee of International Organization.

13. For a detailed discussion of these matters, see Laird, Samuel and Sampson, Gary, “Case for Evaluating Protection in an Economywide Perspective,” The World Economy 10 (06 1987), pp. 177–92CrossRefGoogle Scholar; and Bhagwati, Jagdish, Protectionism (Cambridge, Mass.: MIT Press, 1988)Google Scholar.

14. To some extent, this is already done; see Winham, , International Trade, p. 66Google Scholar. However, while the focus of the newcomers is often on deadlocked issues, cross-issue linkages are rarely pursued.

15. See, for example, Cline et al., Trade Negotiations; Deardorff and Stern, The Michigan Model; United Nations Conference on Trade and Development, Assessment of the Tokyo Round; and Whalley, John, Trade Liberalization Among Major World Trading Areas (Cambridge, Mass.: MIT Press, 1985)Google Scholar.

16. See, for example, Allen, Deborah L., “Tariff Games,” in Brams, S. J., Schotter, A., and Schwoediauer, G., eds., Applied Game Theory (Wuerzburg: Physica-Verlag, 1979), pp. 270–84CrossRefGoogle Scholar; Baldwin, Robert E. and Clarke, Richard N., “Game Modeling the Tokyo Round of Tariff Negotiations,” Working Paper no. 1588, National Bureau of Economic Research, Cambridge, Mass., March 1985Google Scholar; and Chan, Kenneth S., “The International Negotiation Game: Some Evidence from the Tokyo Round,” Review of Economics and Statistics 67 (Spring 1985), pp. 456–64CrossRefGoogle Scholar.

17. A payoff should be understood to comprise the realization of the objective function for a given proposal or outcome.

18. The problem here is the same one that arises if an analyst desires to quantify the effects of the Tokyo Round codes of conduct: many of the effects are inherently unquantifiable. See Stern, Robert, Jackson, John H., and Hoekman, Bernard, Assessment of the GATT Codes of Conduct, Thames Essay no. 57, Trade Policy Research Centre (Aldershot, U. K.: Gower PressGoogle Scholar, forthcoming).

19. The empirical literature consists primarily of analyses of tariff negotiations. Quantification in the case of tariffs is relatively easy because the difference between the method and degree of tariff reduction proposed by any nation can be measured and compared with that of the status quo. Theoretical approaches to modeling MTNs also tend to focus on tariff negotiations. For two examples and references to the literature, see Mayer, Wolfgang, “Theoretical Considerations on Negotiated Tariff Adjustments,” Oxford Economic Papers 33 (02 1981), pp. 135–53CrossRefGoogle Scholar; and Riezman, Raymond, “Tariff Retaliation from a Strategic Point of View,” Southern Economic Journal 48 (01 1982), pp. 583–93CrossRefGoogle Scholar.

20. Cooperative game equilibriums for MTNs have been calculated by Allen in “Tariff Games,” Baldwin and Clarke in “Game Modeling,” and Chan in “The International Negotiation Game.

21. In the Tokyo Round, a number of side-agreements (codes) with limited membership were negotiated, implying that consensus no longer can be taken as the norm. Although GATT formally requires that its members treat nations on an MFN basis, in practice some degree discrimination occurs. See Stern, Jackson, and Hoekman, Assessment of the GATT Codes Conduct.

22. Chan, “The International Negotiation Game.”

23. Allen, “Tariff Games.”

24. In “Game Modeling the Tokyo Round,” Baldwin and Clarke note that while there are solution concepts that come close to predicting the solution actually chosen, in reality the Tokyo Round tariff negotiations had an outcome that was much inferior to the one that would have resulted from the application of the Swiss proposal. They argue that this was due to the large number of exceptions made in the final stage of the negotiations as countries attempted to achieve reciprocity and satisfy domestic interest groups. This led to a movement away from rather than toward the Pareto frontier.

25. How these agenda items are determined is a separate question. While it is of great interest in itself, for the purposes of determining the scope that exists for agreement once the MTN has started, the agenda can be treated as given.

26. Throughout this article, the term “player” is used in this sense. It is not used to refer to a formal coalition.

27. While there is an element of “art” involved in the determination of the set of possible proposals, the procedure is less sensitive to subjective influences than might be thought. Participants in MTNs usually make clear what they perceive to be the problems on an issue. In cases in which a nation offers no explicit proposals for change, it is likely that the nation considers the status quo to be acceptable. Given a comprehensive analysis of the status quo, most analysts should end up identifying a similar universe of possibilities.

28. Alternatively, if use is made of credible threat strategies, payoffs must be compared to the no-agreement outcome.

29. For an analysis of when coalitions will form in cases in which it is impossible to exclude nonsignatories, see Olson, Mancur, The Logic of Collective Action (Cambridge, Mass.: Harvard University Press, 1965)Google Scholar; and Schelling, Thomas, Micromotives of Macrobehavior (New York: W. W. Norton, 1978)Google Scholar. A necessary condition is that the nations which are able to agree will benefit sufficiently so that free riding by the rest of the world does not endanger the agreement. In cases such as this, Olson refers to these nations as a “privileged” group; Schelling speaks of “k-groups,” with “k” being the minimal number of parties necessary for agreement to be feasible. Economists generally speak of “clubs,” although usually in a context in which exclusion is possible. See Cornes, Richard and Sandler, Todd, The Theory of Externalities, Public Goods, and Club Goods (Cambridge, Mass.: Cambridge University Press, 1986)Google Scholar.

30. As noted previously, however, if threats exist, comparisons need to be made with the payoff associated with the no-agreement outcome.

31. The objective function and its attributes are left undetermined at this point, since they will depend on the issue at hand. An alternative objective might be the maximization of output or the minimization of political losses.

32. This implies that although π will depend on many things, its determinants are not relevant in this connection.

33. This information is a minimal requirement. If enough unambiguous information is available, it may be possible to rank order proposals. To do this, it is necessary to be able to determine the marginal effect of slight changes in the proposals. However, a complete rank ordering is not required to determine the scope for agreement.

34. That strategic behavior can lead to failure to agree is well known. For an analysis of the various ways in which this behavior can lead to a breakdown of discussions, see Raiffa, Howard, The Art and Science of Negotiation (Cambridge, Mass.: Harvard University Press, 1982)Google Scholar.

35. That is, if U_j > U_na for at least two players for the same j, a club could form. In the GATT context, however, a club will only be viable if the major trading nations or blocs are members of it.

36. The same applies if there are no credible threat strategies and it appears likely that an agreement will improve on the status quo only marginally for one or more players.

37. In principle, of course, it is not necessary that issues all be on the agenda. If there were a requirement, theoretically it would limit potential gains, but it also might simplify things, since ensuring that many “linkable” issues are on the agenda would make it easier for the GATT Contracting Parties to agree on an agenda in the first place.

38. For recent works that focus on safeguards and emphasize the importance of the issue for the multilateral trading system, see Hoekman, Bernard, “Services as a Quid Pro Quo for a Safeguards Code,” The World Economy 11 (06 1988), pp. 203–15CrossRefGoogle Scholar; and Sampson, Gary, “Safeguards,” in Finger, and Olechowski, , The Uruguay Round, pp. 143–52Google Scholar.

39. GATT, Review of Developments in the Trading System (Geneva: GATT, 1988)Google Scholar.

40. Golt, Sidney, The GATT Negotiations, 1973–1975: A Guide to the Issues (London: British-North American Committee, 1974)Google Scholar.

41. U. S. Government, United States Policy in an Interdependent World (The Williams Commission Report) (Washington, D. C.: Government Printing Office, 1971), pp. 66–67Google Scholar.

42. See Golt, Sidney, The GATT Negotiations, 1973-1979: A Guide to the Issues (London: British-North American Committee, 1978), p. 26Google Scholar; andWinham, , International Trade, p. 199Google Scholar.

43. Glick, , Multilateral Trade, p. 34Google Scholar.

44. My discussion of the Tokyo Round does not focus on domestic measures, since they did not play an important role in the negotiations. They may play a greater role in the Uruguay Round, however.

45. That is, free riding of this sort was considered to be unacceptable by the major players. This is not surprising, since safeguard issues usually involve LDC exports. It is clear that within-issue trade-offs were useless for LDC in attaining its goal. The question, then, is why the option of cross-issue trades was not pursued.

46. One explanation for this could be that LDCs have less faith in their ability to make full use of more stringent procedural requirements. Alternatively, they might not trust importing nations to adhere to them.

47. Dumping occurs when a firm sells a product abroad for less than it charges in its home market. In the absence of a home market (or in the presence of one that is too small), dumping occurs when the export price is below the fully allocated cost of production. If an exporting firm is found to be dumping and also to be causing injury to domestic import-competing firms, an antidumping duty can be levied. Alternatively, the exporter is often allowed to undertake the elimination of the dumping margin by raising its export supply price. Antidumping procedurescan be used as substitutes for safeguards because criteria for receiving protection are less strict, and it is often not too difficult to show that dumping has occurred. See Hoekman, Bernard and Leidy, Michael, “Dumping, Antidumping and Emergency Protection,” paper presented at the Research Seminar of the GATT Secretariat, Geneva, 10 1988Google Scholar.

48. F' could be worse if the benefits of nondiscrimination were outweighed by the costs associated with losing compensation and having relatively weak preconditions.

49. There are three possibilities: (1) a club forms, and the agreed safeguard rules are applied on a non-MFN basis; (2) a club forms, and the agreed safeguard rules are applied on an MFN basis; and (3) the potential for a club exists, but agreement is impossible because of the MFN constraint. In the third case, free riding is presumably considered to be unacceptable to the potential club members.

50. Although the United States was not extremely concerned with the compensation question during this negotiation, it is the nation that has offered compensation most frequently in the past when invoking Article XIX actions. See Sampson, “Safeguards.”

51. Information on the Uruguay Round is based on interviews with and documents supplied by trade policy officials and diplomats.

52. For a suggestion that focuses on trading off services and safeguards, see Hoekman, “Services as a Quid Pro Quo.”

53. See Hoekman, Bernard, “Developing Country Participation in the Uruguay Round,” Discussion Paper no. 225, Research Seminar in International Economics, University of Michigan, Ann Arbor, 08 1988Google Scholar.

54. See Finger, J. Michael, “Incorporating the Gains from Trade into Policy,” The World Economy 5 (12 1982), pp. 367–77CrossRefGoogle Scholar; Laird and Sampson, “Case for Evaluating Protection”; and Bhagwati, Protectionism.