Statecraft, Trade and the Order of States

In 1989, Francis Fukuyama announced "the end of history."1 Fukuyama was not the first to make this bold claim-Hegel had said as much about Napoleon's victory at Jena in 1806.2 But, unlike Hegel's, Fukuyama's bold claim was not a declaration of the triumph of the state-nation;3 rather, he was declaring

It now appears that, like Hegel, Fukuyama was mistaken in his claim for the end of history. While it is true that democracy defeated fascism and communism in the ideological struggle for political dominance, the State as we know it continues to evolve. History has not ended. The story continues, and as has been the case before, it is the nature of the State6 that is changing.7 Identifying these changes, gauging their significance, and evaluating their relationship with respect to other features of the relations between states is central to understanding how and why the State continues to evolve.

Recent scholarship on the State has largely focused on foreign policy-in particular, the "strategic" aspects of relations between states.8 One of the more interesting claims in this regard is that the very nature of the State (what we call Statecraft) has evolved in response to developments unique to the twentieth century.9 These developments, which include the commodification of weapons of mass destruction ("WMD"), the diminished significance of sovereignty, and the globalization of health and environmental threats,10 have engendered a new approach to strategy.11 Many scholars have devoted their attention to changes in strategy and its relation to the continuing evolution of the State.12 We agree that the State is changing. We further agree that these changes require a rethinking of strategic defense in a world of asymmetric warfare and global networked terrorism.13 However, we do not intend to add to the literature on strategy. Our project draws upon this literature, but is distinctly different.

Our project examines the extent to which the global trade system14 should respond to fundamental shifts in the nature of the State and of international relations.15 Our thesis is that just as the strategic and foreign policies of states are linked to their internal constitutional order,16 the trade policy of states is another external dimension of the State also connected to the State's internal order. The experience of the twentieth century shows that states must acknowledge overarching structural changes within their domestic spheres, then identify, in a timely fashion, how these shifts affect their interaction with the rest of the international economic community. In turn, states must adjust external trade policy objectives and strategies with respect to the international community to accord with their intrinsic political and ideological goals. The failure to do so at the appropriate time will hobble the internal economic health of states and may also hamper free states in struggles against totalitarian movements.17

Our Article proceeds in three principal parts. In Part I, we explore the extent to which the State continues to evolve in the twenty-first century. We draw on the literature discussing strategy to identify the hallmarks of Statecraft among the states that dominated the trading world after World War I-in particular the modern liberal democracies of Europe, the United States, and Japan. Part II argues that, just as law and strategy evolve through an interdependent and dynamic relationship, Statecraft and the international commercial order of states engender each other's evolution through an interactive process. The domestic constitutional architecture of the State18-such as its organization around a nation and its legitimization through the promotion of that nation's welfare-has a profound influence on the ordering of the international trade system and the type of fundamental questions (such as the "linkage" of trade and social regulation) that will face each generation. At the same time, gradual shifts in the foundational rules of the international trade system and in patterns of international economic activity (such as the rise of a new set of international economic actors or transformations in currency markets) affect the ability of the State to maintain its domestic Statecraft and tend to transform the internal order of the State. We illustrate our theoretical argument with an analysis of the Bretton Woods order.

In Part III, we explain how comparative advantage as the animating principle of the General Agreement on Tariffs and Trade ("GATT")19 has set in motion fundamental shifts in Statecraft which, in turn, necessitate the introduction of new concepts and language into the international trade order. We argue that a new constitutional moment is needed-albeit one different in kind from Bretton Woods's drastic departure from past policies and wholesale adoption of comparative advantage as one of the foundational norms of the system-and, with it, a new trade norm for states, which we identify as "enablement of global economic opportunity." We complete our argument with a description of a new set of global institutional settings for world trade, institutions that will enable us to make sense of current changes as we approach an uncertain future.

The gravamen of our argument is three-fold: (i) History never ends, and the interdependent mechanics of Statecraft and the order of states will, in each generation, engender the need for revision of the international commercial order and necessitate a new constitutional moment; (U) Theoreticians and planners of trade can predict not only the issues that a trade system will generate at any moment in history, but also decipher and anticipate the contours of the next generation-to do this, however, they must understand the mechanics of Statecraft and the order of states; (iii) The new order ushered in by each constitutional moment is bound to set in motion transformative mechanisms that plant the seeds of the succeeding generation. Our goal is to outline the contours of the new constitutional moment that we believe is needed, as well as the institutional and normative redirection of trade towards which we believe observers and drivers of trade should orient themselves.

I. THE END OF HISTORY . . . AND ITS CONTINUATION

The Second World War ended with the demise of fascism. The fall of the Berlin Wall in 1989 marked the end of communism and, with it, the triumph of democracy.20 Fukuyama's end of history begins in 1989 with the fall of the Berlin Wall. According to Robert Cooper, 1989 did not mark the end of history, but rather set the stage for the emergence of a new form of the State-the "post-modem state."21 Philip Bobbitt similarly rejects Fukuyama's claim, and views 1989 as merely a step in the evolution of the State. He identifies the new form of the State as the "market-state" which, he argues, will succeed the nation-state.22 These two theorists of the State agree on a number of defining characteristics of the new form of State that, in their view, confirm the continuing evolution of the State. Further, their theories point to a nexus and an interplay between the inner face of the State (its constitutional order) and its strategic foreign policy and military objectives. Bobbitt and Cooper are right about the State,23 but the story they tell is incomplete.

The State has both internal and external dimensions. The external dimension of states-their relations with other states-is expressed in two aspects. The first is manifested through strategy, the most obvious example of which is war.24 The second expression of the external dimension of the State is through trade and commercial relations. The modern era of strategy, which ended around 1989, spanned the better part of the twentieth centurycommencing with World War I, continuing through the defeat of fascism, and ending with the fall of communism. During that period, liberal democracies organized themselves as modern welfare nation-states.25 A commitment to sovereignty drove the internal and external dimensions of the modern state.26 Modern states adhered to absolutist notions of sovereignty in their internal policy choices and external policy and military objectives.27 The notion of sovereignty was intricately linked to the nation as a constitutive feature of the State, to welfare as the legitimating drive of the State, and to the balance of powers as a key component of the State's external strategy.

Sovereignty was inextricably tied to the idea of the nation. The essential goal of the State was to protect the nation against external threats and to provide for its internal welfare. The nation was sovereign, and although it was largely ethnic, it defined itself by its physical borders and the population it inherited throughout centuries of evolution. Having grown and become more powerful, the modern state underwent a metamorphosis from state-nation, a state supported by a nation, to nation-state, a state supporting its nation. The primary means of support was the notion of welfare-coupled with a system of protection of minority rights or rights deemed fundamental-as its legitimating objective. Welfare and the maintenance of the domestic order were the principal features of the internal dimension of the State. Europe and the United States differed in their domestic approach to providing welfare to the cit?2enry. Europe had a stronger set of social entitlements, such as unemployment benefits, large family allowances, strong employee protection, and early and generous retirement benefits. For several reasons, some historical and some structural, the United States did not adopt social entitlement packages to the same extent as Europe.28 Nevertheless, as in Europe, the legitimacy of the US government depended in substantial part on its promotion of the welfare of large middle and working classes.29

Lastly, the notion of balance of powers was linked to the concepts of sovereignty and of the nation as the interlocutor of the state in its quest for legitimacy. In the modern system, nation-states with strong sovereign powers maintained international order by balancing each other's powers. Balance of powers, rather than the hegemonic domination of an empire or superpower, was the preferred method of achieving order.30 The modern world viewed states as equal citizens of a global society. The concept of hegemony was antithetical to this worldview, however fictional or detached from reality it might have been. Thus, it was the alternative, an order based on balance among equals (or a substantial group of equals), that came to dominate the Western world in the modern era.

The modern state is gradually declining in various parts of the world, particularly in Europe. To be sure, the nations of the world continue to substantially adhere to territorial and constitutional Statecraft of the kind that emerged in the twentieth century. However, a foundational transformative shift similar to the one that brought about the nation-state in the twentieth century is taking place. Notions of borders and sovereignty are gradually losing the central role they played in the modern era. We are witnessing a correlative diminution in the effectiveness and importance of maintaining balance among equals on the international scene.31 Increasingly, post-modern states accept, to various degrees, control-sharing over domestic matters with supranational or global regimes and institutions.32 Furthermore, states are experiencing a loss of domestic control because, as we will describe in more detail below, traditional tools for regulating social and economic life have been rendered less effective by increasingly scattered cross-border forces and the rise of environmental, health and security threats that are too diffuse to be controlled by domestic policy alone.33 The nation is declining as the basis for the State. Instead of a world subdivided into discrete nation-states and national economies, the international landscape has become diffuse and the main interlocutors of the State and the order of states have become cross-border actors.

Welfare has also begun to fade as the legitimating basis for the State.34 The decline of welfare is taking two discrete forms: the strong strain in Continental Europe on the cradle-to-grave systems established in the twentieth century35 and, perhaps more significantly, the failure of the welfare state to take root in the South. With regard to welfare, Europe is witnessing a dual internal phenomenon. In part, the welfare system is viewed as an inalienable set of social rights, a core component of the acquis social set of progressive measures that should never be reversed! Britain, for example, is increasing its public spending on welfare.36 In France, any governmental attempt to decrease the level of benefits in a meaningful way is sure to be met with unrest and protest of the kind that paralyzed the country at various times in recent years. At the same time, the State by all accounts is rapidly losing its ability to sustain welfare programs. The aging of the European population endangers retirement schemes.37 The economic burdens placed on employers hinder employment, social mobility, and fluid growth, and such burdens consistently fall short of generating the income necessary to shore up the system, which is constantly running at a deficit.

The difficulty of achieving welfare will arguably lead governments to shift their focus towards the maximization of economic opportunity. Such policies could take many forms. In Japan, for example, the government may focus on subsidizing research and development to give domestic industries the best possible edge.38 Elsewhere, the emphasis may be on providing education and infrastructure while deregulating markets.39 Other societies may emphasize commercial structures that give workers ownership stakes, so as to maximize their opportunity for economic advancement.40 In all events, instead of focusing on guaranteeing the welfare of everyone, the State will gradually shift its foundational approach towards maximizing the economic opportunity available to all.41 While welfare policies of course continue to obtain in Europe and throughout the world, the tide of history seems to be shifting away from welfare as the core element of Statecraft that was axiomatic in the modern world.

In sum, the developments described above have resulted in a trend towards the modern state's loss of its ability to control the domestic arena and to enact policies that would protect the welfare of the nation.42 To be sure, the world is not completely post-modern; as Cooper notes,43 post-modern states live alongside modern and even pre-modern states.44 In addition, there are various pre-modern states in the international scene where the official organs of the State do not even enjoy exclusive use of force within their own borders. Nevertheless, we believe that the trend we are describing provides an accurate account of a transformational move in Statecraft and international relations.

II. JACOB'S LADDER: A THEORY OF INTERWOVEN MECHANICS

The foundational notions of the international trading system do not reflect the outcome of a material dialectic among states (such as the historical recognition of the damage that arose from the failure to follow a comparative advantage model), but arise from the interwoven architecture of the State, the international trade order of states, and the parallel yet connected evolution of both. Transformations in domestic Statecraft drive the evolution of the international trade order and, in turn, transformative shifts on the international commercial plane tend to change the domestic configuration of the State.

This relationship of interdependence and connectedness is dynamic and manifests itself on a foundational level. The domestic constitutional architecture of the State,45 such as its choice of a particular route to the nation's welfare through policies of indicative planning or cradle-to-grave social protection,46 has profound repercussions on the ordering of the international trade system.47 At the same time, shifts in the foundational rules of the international trade system and in patterns of international economic activity, such as the rise of a new set of international economic actors and transformations in currency markets, affect the ability of the State to maintain its domestic Statecraft and tend to transform the internal order of the State.48 Like Jacob's Ladder, the State and the order of states are animated by a constant interaction going from bottom to top, and vice versa, in a dynamic motion that shapes both spheres and, in turn, propels them forward through various stages of history. Just as Fukuyama and Hegel were lured into thinking that strategic and political history had ended, trade theorists might misinterpret a historical transformation of sufficient significance as sounding the end of trade history. Comparative advantage, for example, might acquire a semi-mythical status as a timeless value bound to animate the trade system on a foundational level. In truth, however, the story always continues: comparative advantage was clearly an appropriate foundational norm for a trade system dominated by modern liberal democracies organized in Statecraft form but, as explained below, it no longer provides a complete account of the trade story.

As detailed below, the dynamic relationship of interdependence and connectedness between the State and the order of states may be observed at a descriptive level. In addition, as a normative matter, states must acknowledge overarching structural changes within their domestic sphere as well as on the international plane, and quickly identify how these shifts affect their interaction with the rest of the international economic community. Trade policy must then be adjusted to accord with internal political and ideological goals and with the evolving international scene. To be sure, structural shifts do not happen overnight, however, there comes a point when a constitutional moment is needed. At that moment, states must come together and recognize that Statecraft and the order of states have undergone a metamorphosis of sufficient magnitude to warrant a new set of constitutional rules.49

The constitutional moment is a rite of passage, in that it marks an international awareness that change has occurred. It is an important exercise in recognizing the nature of the change and in instilling throughout the system fundamental new norms that will develop throughout the new era. The states' failure to recognize the constitutional moment will not only prejudice them economically, but also possibly hamper the achievement of their non-trade strategic foreign policy objectives. Ending history, then, is not only an academic and intellectual mistake; it is as dangerous an illusion as believing that World War II invaders could be repelled with a Maginot Line born out of World War I. The human difficulty in stepping out of deeply rooted paradigms to look at the future is bound to generate defeat in the present.

We have selected the twentieth century as a historical prism from which to illustrate our theory, focusing on the GATT/WTO system. The twentieth century trade story, as classically told, is one of failure and redemption. In this instance, beginning the inquiry with an exploration of redemption, and telling the story with the voice of an economist, makes the contours of failure clearer. Redemption happens after World War II, with the incorporation into the GATT of the theories of absolute and comparative advantage developed by Adam Smith and David Ricardo.50 Both economists posited that states would maximize their wealth by unilaterally eliminating import restrictions.51 However, they did not address the use of law to erect an international system that would institutionalize their economic insights.52 The GATT did that.53 At its core, the GATT established three "disciplines" that removed states' ability to discriminate against one another in an effort to protect the domestic economy: (i) tariff bindings; (U) a non-discrimination norm applicable to internal taxation and regulation; and (iii) a prohibition of quotas and like measures.54

The first trade liberalizing discipline created a framework for GATT Contracting Parties to bind the tariffs that they imposed on foreign products, the primary protectionist barrier of the first half of the twentieth century.55 In turn, each state committed, under the Most Favored Nation Clause of the GATT, to extend to all trading partners the lowest tariff concession chosen by the state with respect to any partner. This structure generated eight rounds of trade negotiations, and a drastic reduction of the global tariff barriers to trade that prevailed before Bretton Woods.56

The second discipline required the Contracting Parties to respect a nondiscrimination norm that guarantees all imported products the same treatment as "like" domestic products with respect to internal taxation and regulation.57 At its core, the "national treatment" discipline prevents the circumvention of a tariff binding through imposition of a discriminatory burden in the form of, for example, an internal sales tax.38 The concept of discrimination is of course laden with ambiguity and has generated substantial controversy. Controversy arises because the discrimination principle allows international challenges to national policies ostensibly unrelated to trade, but that nevertheless disparately impact foreign products on account of disparities in the regulatory levels of protection in various states-one of the facets of the "linkage" issue.59 However, putting aside interpretive difficulties, the national treatment component of the GATT is an indispensable element of any treaty of integration that includes a tariff reduction scheme. Without a national treatment discipline, a member state of such a treaty could impose discriminatory taxation or regulation on foreign products so as to avoid its tariff obligations.60

The third discipline prohibits the imposition of quantitative restrictions to trade and their functional equivalents.61 The purpose of this discipline, and the interpretive questions that it has generated, parallel the national treatment story. Here, too, the founders of the GATT evidently sought to deprive states of a weapon for circumvention of the tariff discipline.62 The GATT, then, gave multilateral, institutional expression to the classical economic theories of Ricardo and Smith. The orthodox economic account of the GATT speaks of redemption, because it contrasts the GATT with the economic failures that preceded World War II. The crux of the account is that, before World War II, the major trading partners failed to recognize that commerce should be based on comparative advantage and that states should remove artificial barriers to trade (principally tariffs). Worse still, not only did the Treaty of Versailles oppress Germany instead of bringing it into Europe's fold as a partner, but the liberal democracies stubbornly insisted on what economic theories would describe as a timeless notion of economic organization.63 Bretton Woods is the constitutional moment of this story in that it reflects the understanding of the historical mistakes made by the liberal democracies. The Book of Mistakes had to be rewritten into the Book of Redemption. Economic collapse caused by trade wars would not only be unthinkable, but made impossible by a trading system that adopted comparative advantage as its fundamental value.64

All serious students of trade, however, have learned that the economic ideology of trade provides only a partial, and perhaps even misleading, account of the original intent of the framers of the GATT and the reasons for its general acceptance by the Contracting Parties. In order to understand the GATT, one must understand the internal foundational frameworks and constitutional rules of the major players who brought about its formation.65 These constitutional rules help explain why the major economic powers that formed the GATT chose the legal structure that it embodied, and mustered the political willingness to accept the trade disciplines imposed under the GATT.

Our account complements the purely economic story. We essentially hold that the internal configuration of the states that formed the GATT needed to work in harmony with any international system put in place. States did not simply have an economic epiphany. They chose the framework underlying the GATT because it allowed them to maintain their domestic architecture as they entered into an international framework that expanded the global economic pie. The main players' commitment to an interventionist welfare state ensured that the economic project would be married to a political redistributive enterprise.66

While this account goes deeper than the economic tale, it still speaks of the end of history. It starts with constitutional rules, which were fundamental to modern liberal democracies after World War II. These rules included the broad legal and policy schemes that embodied a given nation-state's wealth choices with respect to redistributive justice and the relationship between various economic segments of society. In Europe, these schemes took the shape of public enterprise, unemployment compensation, housing aid, assistance to large families, and other policies intended to transfer wealth from high-income segments of society to lower income workers and thus protect discrete classes deemed to be disadvantaged in the market. In the United States, the emphasis was more exclusively on tax and transfer policies. Japan, for its part, relied heavily on centralized planning of industrial activity and subsidies of research and development that would shore up enterprises housing a large part of the domestic workforce.67 Despite their different viewpoints, all major players shared a basic philosophy of domestic Statecraft that went hand-in-hand with liberalized trade.68 The Bretton Woods system married international economic policies (and an international order of states that tended to maximize wealth creation) with a legal framework that protected the nation-states' ability to control their domestic economies.69

The harmonious functioning of domestic constitutional rules and international law went hand-in-hand with historical tendencies that made comparative advantage a better foundational norm for the international trading system than the domestically-driven mercantilist policies that preceded World War II. The founders of the GATT believed that mercantilism, as embodied in statutes like the Hawley-Smoot Tariff Act of 1930,70 had contributed to the economic disaster of the 1930s and to the advent of fascism as a contender for a model of Statecraft.71 They thus bound the liberal democracies to a set of rules that would not only make such disasters legally impossible but would in no way threaten their perception of economic sovereignty; the GATT created a world trade system that accorded with their internal laws and politics.72

Our theory posits that the relationship between the domestic constitutional realm and the international trade order of states goes beyond the marriage of a good economic idea with a legal system that makes it politically feasible. We depart from the notion that Bretton Woods joined comparative advantage with a theory of modern liberal democracy as the highest expression of the State, thus achieving the ultimate trade order of states. Rather, we submit that Bretton Woods ushered in a crucial yet particular constitutional moment that acknowledged both the then-current evolutionary stage of the State and the new order of states generated by the metamorphosis in Statecraft. From its inception, then, the Bretton Woods system set in motion the seeds of a transformative phenomenon that would ultimately necessitate another constitutional moment for the trade order of states.

Our starting point coincides with the analysis of Bretton Woods as a joint political and economic enterprise in that we agree that the Keynesian welfare state was particularly well-suited for the GATT framework and its introduction of comparative advantage and anti-protectionist rules. Keynes was right to call the lawyers, and the political theory that they wrote into the GATT, the "poets of Bretton Woods."73 The GATT, as explained above, sheltered welfare policies and left its constituent states free to act as experimental laboratories for improvement of their peoples' welfare.74 All in all, it is true that the GATT established a framework that insulated domestic politics and redistribution choices from international intervention, and to that extent accorded with the ethos of the welfare state.

However, in our account, Bretton Woods came (and, as discussed below, it came too late) to crystallize in a constitutional moment transformations that had previously taken place and to take one more constitutional snapshot in the story of human organizational evolution in relation to trade and the State. Recognizing Bretton Woods as such mandates inquiry into what the next constitutional stage should be, and when the rite of passage that will set it in motion should be held. That inquiry is our task in Part III. For the moment, let us explain the Bretton Woods that was (and the Bretton Woods that should have come earlier).

As discussed in Part I, the State may be understood as an enduring entity that undergoes successive constitutional cycles. During each cycle, the State exhibits relatively stable, yet slowly shifting, constitutional features on both the domestic and international planes. At the same time, often as a result of the operation of these constitutional features, new realities arise that force states to adjust their fundamental constitutional elements, and gradually usher in yet another cycle. Though theorists like Hegel or Fukuyama predict "the end of history" at these moments, they are not in fact signaling the beginning of a Kantian era of "perpetual peace,"75 nor an end to the evolution of Statecraft. Rather, those voices keenly reflect a sentiment of transformation, widely felt, that should prompt an inquiry into whether a new constitutional cycle may be at hand.

The State that Bretton Woods faced arose from a period of solidification of the "nation" as its basis. At least in Europe, twentieth century states were founded upon nations that had come together under a State for the purpose of amassing resources and fighting wars that would further their goals of solidification.76 On the international scene, these states maintained complex colonizing enterprises with strong commercial motivations that by all accounts generated substantial economic benefits for the colonizers.77 This influenced the political and economic power of those nation-states that dominated the international scene. At the same time, the domestic process of building a nation generated a population comprised of various segments collectively affiliated with a single state; these segments included a large working class, a bourgeoisie, and upper classes or nobility.78 The State was then forced to contend with the newlyformed nation.

The focal point of our inquiry is not the organizational nature of the State as a modern liberal democracy, but rather the solidification process that it experienced, the attendant birth of a nation as its support, and the evolution in Statecraft that arose out of these phenomena. It is against this background that the competing theories of Marxism, fascism, and modern liberal democracy compete with one another for control of the State. Under each scenario envisaged by the models, whether a triumph of the workers, an eternal Reich, or Fukuyama's "end of history," Statecraft history runs its course and ends in a particular form of organization in relation to the nation.79 In each case, the nation is the basis of the State, and the welfare of that nation is the state's legitimating raison d'?tre. Hence, a shared objective is achieved by different routes. Without this evolution of Statecraft, the competing ideologies would not require the conquest of additional territory.80

The significance of the nature of Statecraft for Bretton Woods lies in the natural harmony between comparative advantage and a nation- state's Statecraft. We agree with scholars such as Ruggie that from a political standpoint, Bretton Woods worked well for modern liberal democracies.81 We agree with Keynes that, without the delicate poetry of Bretton Woods, the modern liberal democracies might not have accepted the GATT as they did.82 We accept the economists' account of comparative advantage as a better norm for the twentieth century trading world than mercantilism.83 However, our story focuses on Statecraft as an integrated set of ideas and concepts and as the concrete manifestation of those ideas in the domestic and international realms and in the ladder that links them. We submit that by 1917, the modern liberal democracies had sufficient evidence of the need for a trade constitutional moment in the realm of pure ideas and their manifestation in the economic reality of the states. Thus, Bretton Woods could have occurred then as the next stage in the evolution of Statecraft and ordering of states.

By 1917, the nation-state, and the internal economic order it generated, had resulted in an industrialized world subdivided into discrete national economies. The nation owned virtually all means of production within the territory governed by its state, the welfare of that nation provided the State with its legitimating drive, and states had the means and the incentive to regulate and control the domestic realm.84 The very elements that changed the nature of Statecraft, from a State supported by the nation to a State harnessing itself to the nation, were reflected in the domestic reality. The core assets of each state lay in the hands of the nation-one of the key assumptions of Bretton Woods that is gradually waning today.85 Industrial, agricultural, and other types of output could consistently be identified with the nation. The trading world could be subdivided into blocs, each of which was comprised of an aggregate of goods, capital, assets, currency, and other resources that in a real sense belonged to the nation. Nevertheless, the State had a sufficient degree of control over this "national" economy, and a concrete bloc of resources associated with its nation, to implement welfare policies of the type contemplated by the economic and political bargain of Bretton Woods and to legitimize itself vis-?-vis the nation. Given the condition of Statecraft in 1917, the foundational norms of the trade order of states had to change, thus signaling that the time had been ripe for a constitutional moment by the time of Bretton Woods.

The last pieces of the Statecraft puzzle lie in the concept of balance of powers and in the connection between strategy, war, and the trade order of states. The modern world, as described by Robert Cooper, includes balance of powers as an essential feature.86 A multi-polar world of solidified nation-states rests on a balance of powers among its constituent entities. In the trade world, this phenomenon is replicated, and here again the Bretton Woods moment may be understood as recognizing that phenomenon, albeit too late. Bretton Woods joined the theory of comparative advantage with substantial cross-Atlantic investment into sovereign, democratic blocs in Western Europe (and Japan) as part of the Marshall Plan. The new trade system respected borders and sovereignty, and it allowed states to advance national welfare through internal policies. The Marshall Plan's infusion of capital into Europe created trading partners whose economic strengths would enable them to maintain the requisite balance of powers.87 In turn, the GATT as an institution followed the one-state, one-vote model of the United Nations (the very phrase connoting the prevalence of the nation-state as the model of Statecraft), and organized itself around succeeding rounds of negotiation that gradually reduced barriers to (and otherwise liberalized) trade.

III. TRADE AND THE NEEDS OF THE TWENTY-FIRST CENTURY

We submit that the GATT theoretical framework was a unique expression of Statecraft in the evolution of the nation-state. The State harnessed itself to the nation following an era during which it mustered the strength of the nation to solidify itself. Its legitimating raison d'?tre was the guarantee of the nation's welfare, which expressed itself through wealth redistribution and other interventionist policies that varied from state to state.88 Comparative advantage, as expressed through a trade-liberalizing order of states, complemented domestic control over these policies.89 Put otherwise, Bretton Woods established a modern order of states consistent with the solidified State at the core of modern Statecraft. Our claim is that the international trade order generated by Bretton Woods was (ironically) bound to erode the nation-state, contribute to the arrival of post-modern Statecraft, and necessitate an adjustment to a new international order.90 The new order, we argue, calls for a set of norms and institutions that will complement those that Bretton Woods introduced to spread the gospel of comparative advantage. We identify the "enablement of global economic opportunity" as the new foundational norm for the system, and diffuse, interconnected institutional frameworks, charged with implementing discrete projects rather than comprehensively achieving a goal such as comparative advantage, and operating outside of the one-state, one vote model of the modern world, as the institutional setting to actuate such norm.

There are three corollaries to our argument: (i) History never ends because the interdependent mechanics of Statecraft and the order of states will, in each generation, usher in the need for revision of the international commercial order and hence a new constitutional moment; (ii) Theoreticians and planners of trade can predict not only the issues that a trade system will generate at any moment in history, but also decipher and anticipate the contours of the next generation, but only if they understand the mechanics of Statecraft and the order of states; (iii) Each constitutional moment is bound to set in motion transformative mechanisms that essentially plant the seeds of the succeeding generation. At present, we are witnessing the passage to the post-modern generation of trade.

A. THE TRANSFORMATION OF THE BRETTON WOODS WORLD

Bretton Woods inherited and shaped a world subdivided into national economies coextensive with the nation-states that established the trade order of the GATT. Again, the theoretical foundation of the system respected sovereignty, left it to internal domestic policy to control the redistribution of wealth, and removed trade restrictions as protectionist tools from the panoply of government interventionist policies.91 Looking at the Bretton Woods order right after World War II through the lens of modern Statecraft, a theoretician of trade could have articulated the principal legal and structural issues that would face the system over the next decades. For instance, even though it was deflected by the poets of Bretton Woods in the embedded liberalism bargain,92 "linkage"93 was bound to become a core question facing the Bretton Woods generation because of the central place of sovereignty and control over the nation's welfare in the modern state.94 Further, as a matter of predictive history, a theoretician armed with the Statecraft lens could have foreseen that the Bretton Woods order would generate a transformed international economic landscape. In turn, as described below, the metamorphosis of the trading world was bound to contribute to the transformation of Statecraft and, in time, to generate the need for a revision of the international trade order. We will first outline the metamorphoses that we believe have brought us to the point of this new constitutional era. Then, in Part III.B, we will delineate the contours of the era and the foundational norms and institutional framework that we believe should be put in place.

As a result of Bretton Woods, it was inevitable that the subdivision of the world into economic units coextensive with nation-states would be eroded.95 The GATT and the WTO opened up borders to trade in goods and services; this openness lies at the heart of comparative advantage. In such a marketplace, goods and services are exchanged across borders by consumers, distributors, and manufacturers. Manufacturers will purchase components necessary for their output, and distributors will purchase products for domestic resale, from jurisdictions that enjoy a comparative advantage. Importers will inevitably seek to acquire equity or other stakes in their suppliers, so as to increase profit margins. Conversely, exporters will seek to participate in the profits of the importing companies. Joint ventures and other cross-border partnerships will flourish. It is beyond the scope of this Article to describe exhaustively all patterns of economic activity that resulted from the opening up of borders to trade in goods and services, but the upshot is that the trading world that grew out of the Bretton Woods system gradually "flattened" the economic units that formed the core of that system (the nation-states).96

Interloping ownership and the spread of production units across nation-state borders has contributed to the replacement of national products with global, diffuse goods. Indeed, a handbag manufactured in China, designed in Italy, bearing a French brand, and marked as "Made in Italy" is not a product of any particular country, whatever the rules of origin might have to say about its classification for tariff purposes. For example, DaimlerChrysler manufactures cars that traditionally were viewed as quintessentially German (such as Mercedes-Benz) and American (such as Jeep). However, after entering into a strategic alliance with Mitsubishi Motors, it now also markets car brands commonly associated with Asia.97 Its one billion shares are owned by investors from all continents. This phenomenon obtains even on a small scale: New York's garment district has shifted its production en masse from Brooklyn to the Far East. These US garment manufacturers began the shift by shipping materials for fabrication, and later they came to acquire factories or enter into strategic alliances with their producers. Conversely, the Far East manufacturers are increasingly acquiring stakes in their clients.98

The transformation of patterns of economic activity brought about by Bretton Woods has been compounded by the revolution in global communications. The steel mill, textiles plant, or agricultural field of the twentieth century has been replaced by computer workstations that can be run from virtually anywhere in the world. Microchips can now be manufactured in Silicon Valley from computer software using codes written in India that, in the aggregate, can be compared to a factory in terms of complexity." Transcription services can be outsourced via access service provider software to the Philippines.100 An American appellate brief can be researched and written in Jamaica and filed by a licensed attorney in Camden, New Jersey.101 Increased trade and competition were bound to generate innovation, and the resulting communications breakthroughs furthered the establishment of a global marketplace where the phenomenon of discrete national economies has eroded.

Further, the explosion of economic activity in the transformed world has also brought about a gradual shift in the fundamental policy tools of economic regulation and wealth transfer from the domestic to the international realm. Monetary policy, for example, is increasingly escaping control by states. Although commentators disagree as to the extent of the loss of control by states over monetary policy, the sheer magnitude of markets for currencies inevitably results in the transformation of money from a tool of exchange, which can be manipulated domestically, to a mere commodity.102 Public debt is increasingly held by foreign actors, and it is increasingly affected more by the interplay of commercial interests than by domestic policy choices. A simplified and simplistic example is the relationship between the United States and Japan. The United States has for a long time been a main purchaser of Japanese goods, and Japan a main purchaser of US debt. While it is true that the United States has a continuing ability to self-finance its debt, over time this phenomenon may extend to new actors on the international scene, including prominently China, with a resulting decrease in domestic control.103

We posit that these phenomena, engendered by the Bretton Woods-driven transformation of the international economic landscape, have resulted in the erosion of modern Statecraft and contributed to the gradual shift towards post-modern Statecraft that is described in Part I. A nation coextensive with national boundaries and a national economy and output is slowly fading away as the interlocutor of the State, and is being replaced by a diffuse array of economic actors and activities that fall outside of their traditional control. States are losing their grip over some economic tools used for regulation of economic and social life. At the same time, as described in Part I, the states' ability to muster domestic resources to sustain their welfare on a domestic level is being challenged. The upshot is that the welfare of a nation, upheld by a State with strong hallmarks of sovereignty, is fading away as an essential component of Statecraft and a legitimating drive for states. This pillar of the Bretton Woods world is bound to continue to gradually recess and become a more peripheral component of Statecraft as the twenty-first century unfolds, to be replaced by a post-modern Statecraft model in which the State becomes dedicated to (and legitimates itself through) the enablement of economic opportunity.

Concurrently with these phenomena, the balance of powers that characterized the modern world, which was centered on the modern liberal democracies of Europe, the United States, and Japan, is eroding. As a result of the global marketplace wrought by Bretton Woods, the twenty-first century has inherited a multi-polar economic world resting on a global middle class spread across the North and the South. Brazil, India, China, and South Korea, to cite a few, have increasingly become world economic centers. Developing countries have achieved growing importance on the world markets and gradually eroded the dominant market share of the developed countries.104 The old second World, made up of communist countries, is being replaced by a new second World comprised of economies formerly classified under the global heading of "developing countries."103 Lying within and alongside the first (post-modern) and second (modern) economies are pre-modern collectives of people that lack the education, infrastructure, and other conditions to benefit from the liberalization of trade that the WTO brought about. These collectives may be Brazilian shantytowns, Afghan mountain towns, or the "excluded" neighborhoods that surround Paris. The bottom line, though, is that the main interlocutors of trade are no longer national middle classes represented by their states; rather the trading world is comprised of a diffuse trading class, numbering some eight hundred million people and spreading out in a multi-polar economic configuration, that is surrounded by those who have yet to become meaningful participants in the global marketplace.

The metamorphosis of the Bretton Woods world means that the trade system's conceptual tool for understanding itself (an aggregation of nation-states governed by the sovereignty, welfare, and balance of powers principles of the twentieth century) is eroding. Our thesis holds that a new constitutional moment is needed to usher in a new trade norm and trade institutions that will complement Bretton Woods, comparative advantage, and accord with the postmodern evolution of key actors of the trading world. In the next subpart, we outline the contours of the new norm, which we describe as the "enablement of global economic opportunity," of the post-modern institutions needed to implement the norm, and of the (modest) constitutional moment that we envision.

B. THE ENABLEMENT OF GLOBAL ECONOMIC OPPORTUNITY

The "enablement of global economic opportunity" is a norm that accords with Statecraft in a diffuse trading world no longer comprised of discrete economic units coextensive with a nation whose welfare the State is dedicated to promote. Our starting point, as with Bretton Woods, is grounded in domestic Statecraft. As we argued in Part I, modern nation-states are gradually being replaced by a collectivity of post-modern states that, although still living side-by-side with modern and pre-modern collectives, will continue to spread post-modern Statecraft during the twenty-first century. Whether they are in fact called "post-modern," or go by labels such as "market-states," the important substantive Statecraft element within those states is the gradual replacement of the guarantee of the nation's welfare with the pushing and prodding of economic activity as the legitimating drive of the State. Additionally, sovereignty and balance of powers will gradually fade away because of the diffuseness that characterizes the global marketplace and will be replaced by a horizontal playing field created by the continued rise of a global trading class spread across borders.106 As we made clear in Part I, these phenomena do not mean that the State will disappear. Rather, it will, slowly but surely, move on to its next cycle and take on indicia of Statecraft different from those exhibited in the modern era.

We submit that instead of managing welfare, the nation, sovereignty, and balance of powers, post-modern states will increasingly need to manage diffuseness on the international field and focus on the relationship between their trading class and those of other modern and pre-modern collectivities. They will then be able to foster economic opportunity for their own trading class. In turn, just like Bretton Woods established a trade order that accorded with the components of Statecraft of the modern states, a new constitutional era should usher in a trade order that accords with these transformed elements of Statecraft in the post-modern world. The trade order of states should establish norms, to be superimposed on the Bretton Woods framework, that will embody the enablement of global economic opportunity in a constitutional rite of passage. We describe this constitutional rite of passage below.107

Establishment of the enablement of global economic opportunity as an animating norm of the trading system requires that we move beyond the WTO and establish a new set of institutions. We believe that the trade institutions of the future will lie outside the WTO, have a diffuse and shifting membership consistent with the state of the increasingly post-modern trading world, and be dedicated (at least initially) to implementing discrete projects and adopting ad hoc regulation that in all likelihood will not apply to all states that belong to the WTO (double standards). Although our vision evokes the "World Economic Organization" that some scholars have advocated,108 we prescind from any comprehensive global economic government charged with charting out a universal course of action to achieve a stated goal (such as comparative advantage) for everyone involved. Unlike the twentieth century modern society of nations acting under a one-state, one-vote framework (which replicated the internal order of modern liberal democracies), we advocate a post-modern institutional framework that will work together with states and industry representatives to manage the enablement of global economic opportunity throughout the globe on a discrete, issue-driven basis.

This institutional structure should be consistent with the configuration of the post-modern world. Thus, the structure should reflect the fact that the world is no longer subdivided into economic units coextensive with the nation-state. The solution lies in organizing trade governance along industry lines and establishing flexible institutional frameworks to address the issues that arise within each subject matter area. The diffuseness of the post-modern world has created a global middle class that is displacing the nation-state as the true interlocutor of trade. That middle class may be conceptualized as gravitating around a number of discrete industries, each of which raises a given set of issues on the global scale.

Consider, for example, the fashion industry. In that industry, the issues of the day involve, first, the displacement of the means of production to the Far East and other countries where cheap labor abounds, and second, the ability of mass merchants and other retailers from Europe and the United States to gain access to the emerging markets of the Far East.109 To respond to competition, the high-end brands are lowering their standards to tackle less luxurious markets. The mid-range brands are being squeezed out of their markets by these luxury brands and by the generic competition that comes from the Far East. They are riding the tide, waiting to tackle the emerging Far East consumer markets. Thus, industry-specific studies of the issues of the day and contextual negotiation of possible international regulation and projects are needed to manage the enablement of global economic opportunity within each industry.110

As explained above, states will not go away and, in our model, they will retain a key role in the conduct of international trade organization and governance along such industry and issue-specific lines. In keeping with the diffuse nature of the international marketplace, we believe the new trade organization should be comprised of a shifting representation of states and their governments depending on the industries at issue. The organization could have permanent trading partners (which we will refer to as the "Trade Council") and then delegate to responsible persons, as determined by expertise in the given subject matter area,111 who would work jointly with industry representatives and (as explained below) other international organizations to develop appropriate rules. By way of illustration, the trading members could be: the European Union, the United States, Brazil or an alliance of South and Latin American States, Australia, India, Indonesia, the Arab League, Japan, an alliance of the Southeast Asian "tiger states," and a union of African states. These members could be supplemented by states that are important actors in a particular industry. They could act collectively or, if a particular issue so warranted, by vote of a subset of states that join together in a given subject matter area.112

In each instance, the Trade Council would establish programs designed to create the conditions necessary for enablement of global economic opportunity. Consistent with diffuseness and post-modern Statecraft, the Trade Council would coordinate with other international institutions. In the fashion industry example discussed above, the Trade Council could coordinate with the International Labor Organization. This type of "external cooperation," which some scholars of trade advocate, would be in line with the diffuse nature of the post-modern world.113

In addition, the Trade Council could determine which issue areas (beyond the traditional areas dealt with by the WTO) are good candidates for regulation.114 The norm of enablement of global economic opportunity carries in its penumbra other norms, such as anti-corruption rules, that could be more effectively enforced by cooperation between the Trade Council and, say, the International Criminal Court or ad hoc tribunals.115 Likewise, the Trade Council could coordinate with central banks and other financial institutions or organizations to address financial and monetary issues taking into account industry-specific concerns. For example, the recent fall of the dollar,116 if met with the inability or unwillingness of the traditional domestic institutions to stem the tide, could deeply unsettle the trade world. Europe could lose substantial market share in the United States. Chinese products, priced principally in dollars, could become even cheaper than they are now, and perhaps more importantly, the Chinese consumer could lose a substantial amount of buying power vis-?-vis its European partners. These issues, however, cannot be considered exhaustively without a study of their impact on trade in various industries. While international institutions and mechanisms already exist to handle those questions,117 the obvious linkage between trade and financial and monetary matters would, in today's diffuse world, make it logical for the Trade Council to turn its attention to international coordination, information sharing, and possibly joint norms, again on an ad hoc basis.

The type of economic development fostered by this new trade institution will also be in line with the diffuse world of the twenty-first century. The twentieth century's Marshall Plan was intended to shore up nation-states so that a trading world with a relative balance of powers could be established. We believe that twenty-first century trade will also require a Marshall Plan-like investment to complement trade, though one that is of a more modest, gradual, and ad hoc nature in line with the pushing and prodding of economic activity that characterizes the trade norm that we advocate. The Trade Council we envision would coordinate with regional and other development banks, and other institutions, to promote economic, educational, and infrastructural investment. It would work to shift industries of the type now spreading to modern societies such as India or Brazil to pre-modern societies, and generally spread economic opportunity where it is most needed. It could also, in coordination with other international institutions, implement proposals such as that advanced by Jeffrey Sachs to combat poverty in the most pre-modern of collectivities.118

Our proposed shift in the trade world should be marked by a constitutional moment. Unlike Bretton Woods, it would anticipate the historical tide before change is forced upon us (possibly in an atmosphere of crisis). Rather than a "North" and a "South," we are faced today with diffuse blocs that cut across traditional borders, coexist within borders, and form the new stage of our political and economic evolution. From inward-looking and outward conquest (in the pre-modern era), to collaboration and the creation of a balanced bloc of sovereign nations in the North (during the modern era), we have entered into a dynamic world where North, South, and the former communist bloc blend to create a diffuse society of post-modern states lying side by side with, and containing within themselves, pre-modern societies.119 The fundamental challenge of the post-modern society of states will be to preserve a world where the trading blocs across the world continue to grow and to contain countervailing forces-chief among them terrorism, the conduct of asymmetric war (especially economic warfare) through terror, and the takeover of a nuclear state by rogue forces. The strategic importance of consolidating a Northern bloc of liberal democracies is no longer at the top of the agenda. If trade, as the outer face of the state, is to follow the inner constitutional order of post-modern societies, and also to further the states' foreign strategic goals, a constitutional moment must reconfigure the inner constitutional order to accept that the twenty-first century principal commercial interlocutors are the cross-border, diffuse trading classes of the world.

Unlike Bretton Woods, the constitutional moment of the twenty-first century will not usher in a comprehensive regulatory framework dedicated to achieving a norm,120 but will mark a bifurcation of the international trade order into two distinct parts: the completion of the comparative advantage enterprise within the umbrella of the WTO and its negotiating rounds121 and the enablement of global economic opportunity through institutions of the type we advocate. A constitutional moment, in the form of a conference akin to the Bretton Woods gathering, should formalize and mark the passage to the redirection of trade. At that conference, the Trade Council would be established and a broad document acknowledging the new trade norm adopted. However, rather than a comprehensive regulatory framework such as the GATT, the conference would merely establish an umbrella framework out of which future regulation and projects would arise. The post-modern world is not only diffuse, it also generates issues of such complexity and magnitude as to make it impossible to establish ex ante a comprehensive normative framework to effectuate the enablement of global economic opportunity. In such circumstances, the system should set in motion a framework for adopting ad hoc regulation and projects. In other words, adopting the norm, and putting in place the institutions that will further it, will allow for the exact normative contours of the system of the future to take shape and grow in leaps and bounds, based on the actual evolution of an international marketplace still in a state of flux.

IV. CONCLUSION

Once the global collectivity sets in motion a new trade order of states, it will have triggered a new cycle which, like Bretton Woods, will generate novel substantive and institutional issues and, over time, transform Statecraft, undergo additional metamorphoses of its own, and ultimately give rise to another constitutional era. History in fact never ends, but it pauses sufficiently for each generation to recognize its place in the evolutionary path, and to organize its law, international order, and institutions to reflect the needs of the present.

In this Article, we have identified constitutional mechanisms that affect Statecraft, the order of states, and transformative and evolutionary patterns that are borne out of this constitutional interaction. Further, we have articulated what we believe to be the seminal contours of the constitutional order of the early twenty-first century. Today's challenge is to build a system for coming generations, keeping in mind that when we take on the unavoidable task of transforming the current order we also plant the seeds of an equally inevitable future constitutional metamorphosis.

It goes without saying that further study, thought, and analysis will go into creating the architecture, framework, and construction of the new system. Experts in each industry will identify the salient needs of the actors operating in their field and inform policy-makers and negotiators of the choices that face them. Finance and currency thinkers will study the transformed international and domestic landscape and produce the nuts and bolts of the new order. Institutional theorists will analyze the various means of breathing life into the new norms through transformed institutions. To be sure, the current WTO system will continue to operate with comparative advantage as a central norm of trade.122 However, we believe that history will continue to call upon us to bifurcate the trade story and focus on how best to spread global economic opportunity.

The new order will not arise overnight. When Robert Schuman declared his vision of a constitutionally transformed Europe, he pointedly prophesized that Europe would be built through a series of "concrete achievements" which, over time, would yield the new legal order that he visualized in 1950 as the "United States of Europe."123 The interaction of the various European institutions, the resolution of crises such as the Luxembourg constitutional breakdown of the 1960s, and the random workings of the political process have infused the system with an element of randomness on the road to acceptance by the constituent entities. The same animating principles will occur in the international order of states that we envision.

The future evolution of states and trade will surely face setbacks, if not crises. But by paying heed to the evolving course of history, we stand a greater chance of steering it towards a better course. No doubt, we will continue to struggle with poverty, violence, terror, inequalities, catastrophes, and all the other permanent attributes of the human condition. However, by recognizing the fundamental mechanisms that drive our domestic and international orders, we will have done all we can to organize ourselves as best as possible to face an uncertain future.