In the realm of international trade, states face large potential gains from reducing
barriers to exchange, but also constant political pressures to renege on liberalizing
agreements. Thus, IEIs confront dilemmas at the bargaining, monitoring, and
enforcement stages. In the internationalWnancial institutions (IFIs), the basic
problem is to encourage beneWcialXows of capital while avoiding moral hazard
problems that would result from unfettered access to external resources. As a result,
these organizations constantly balance political and economic interests, and much
research has treated the IFIs as principals of their state agents. A second major
theme, running through all of the above issues, is the balance between rule-based
interaction and the unconstrained exercise of economic and political power.
As the number of IEIs is vast, I have to be selective about the organizations on
which I concentrate. Generally, I will focus on institutions that structure trade and
Wnancial relationships. In particular, I will consider the GATT/WTO (the General
Agreement on TariVs and Trade, now called the World Trade Organization) and
regional trade organizations, and the Bretton Woods institutions in theWnancial
area (the World Bank and International Monetary Fund (IMF)). This is not to say
that other organizations are unimportant. The Organization for Economic
Cooperation and Development (OECD) is a vital grouping of developed
economies that collects and exchanges substantial economic information, for
example. A wide range of organizations facilitates more speciWc forms of economic
exchange, such as tourism or trade in particular commodities. Regional develop-
ment banks play an increasingly important role in development, and regulatory
accords (such as the Basle Accord) have at times had profound eVects. Neverthe-
less, concentrating on the major trade andWnancial institutions has advantages.
The scholarly work on these organizations is richer and deeper than that on other
IEIs. In addition, the general analytical questions addressed in studies of these
organizations should provide substantial insight into other types of IEIs.
I begin by providing some background on the study of institutions generally in
international relations (IR). This discussion shows how the study of institutions
moved from being purely descriptive or normative to developing strong analytical
foundations. The modern study of IEIs isWrmly grounded in this more general IR
tradition. Then I turn to focus on trade organizations, then the IFIs. I conclude by
summarizing where the study of IEIs now stands, and what the most promising
directions for future research might be.
1 Intellectual Background
.........................................................................................................................................................................................
Our understanding of the functioning and eVects of IEIs has its roots in the modern
scholarly study of international institutions and international organizations (IOs)
international economic institutions 655