Yale Graduate School of Arts and Sciences

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Getting Countries to Play Fair

Cooperation among nations is seldom easy to achieve given their competing needs and incompatible politics, which is why international institutions like the World Trade Organization (WTO) have been created. In a political climate where competition trumps cooperation and economies are stressed by the recession, multinational organizations have come under attack in Congress, and their value has been seriously questioned.

Allison Sovey (Political Science and Economics) studies the WTO as part of her dissertation research. She has found that it can be effective in depoliticizing trade between countries and removing the impediments that block economic exchanges. The WTO can turn a zero-sum game into a win-win situation for all sides.

This fall, she presented her research at the Association of Yale Alumni Assembly, a gathering of some 300 graduates from all schools of the university. One day of the three-day Assembly was devoted to a celebration of the Graduate School's 150th anniversary as a PhD-granting institution. A few students were invited to present their research, and Allison was one of them. Using video clips of news reports about trade controversies, she discussed the challenges that the WTO has had to overcome since it was founded in 1995. She explained how the WTO has been able to get countries to agree not to use tariffs as a political weapon, thereby increasing trade and keeping trade policy separate from foreign policy. The talk was based on a chapter of her dissertation in which she argues that “by solving ‘hold up problems,’ international institutions such as the WTO can normalize relations between politically dissimilar countries.”

“Hold up” occurs when one country fails to make productive investments in another country because it fears that the partner will demand additional concessions once the investment is made. A historic example of that took place between the United States and China over whether the US would suspend China’s Most Favored Nation (MFN) status. MFN status creates a reciprocal bilateral relationship between the agreeing countries, usually resulting in low tariffs and high quotas for imported goods. Beginning in 1972, MFN was granted to the People's Republic of China on a yearly basis and was invariably renewed by Congress until the Tiananmen Square massacre in 1989, after which it was a source of considerable debate in Congress, and legislation was introduced to terminate China’s MFN status or to impose additional conditions on it.

The uncertainty as to whether China would still benefit from MFN status frightened away investments. The solution lay in an international organization that was independent from American politics, namely, the WTO. In fact, once China was admitted to the WTO, threats to take away MFN no longer carried any weight, so trade and investment between the US and China boomed.

“The WTO increases trade for countries with dissimilar capabilities, non-allies, and different regime types,” she explains. “In the WTO, countries can trade with partner countries when it is economically beneficial, not just with countries they can trust.”

Allison did not set out to be an expert in political economics. In fact, she majored in English literature and philosophy as an undergraduate at the University of Southern California.

“I studied a lot of political philosophy and was writing for the college newspaper, which led me to think about getting a degree in political science,” she says. “I decided to come to Yale because I met people here that I really wanted to work with and because Yale gives students a lot of flexibility, which allowed me to pursue a combined PhD in political science and economics. I really love Yale and have great advisors – Ken Scheve and Thad Dunning in political science and Giovanni Maggi in economics.”

Allison has already published several scholarly articles and is first author of “Instrumental Variables Estimation in Political Science: A Reader's Guide” in the American Journal of Political Science, co-authored with Professor Donald Green, formerly at Yale. Her other publications include co-authored chapters in the Oxford Handbook of Political Communication and Public Health Law Research: Theory and Methods. Allison is aiming for an academic career, but adds, “It is important to me that my work is policy-relevant.” And between school and career, she is busy planning her wedding in June to Charles Carnegie, whom she met in college.

Allison Sovey