A Leader in Institutional Design? Europe and the Governance of Trade and Monetary Relations

In many respects, Europe has been an innovator in the design of international institutions. In trade, Britain led with nineteenth-century unilateral trade liberalization, followed by the Cobden-Chevallier network of bilateral treaties, a customs union in central Europe, and then inward-looking arrangements with colonies.’ In the post-Second World War period, Europe has been moving toward regional political and economic integration since the 1950s. The European Community (EC) has also been a leader in the move toward transregional arrangements linking developing countries (Lomé Agreement) and Eastern European countries to the EC as well as inter-regionalism that brings it together with the Association of South East Asian Nations (ASEAN), Mercosur, and other regional blocs.2 In finance, Europeans were the primary architects of the gold standard in the nineteenth century, and adapted this system at the turn of the twentieth century. European states played crucial roles in the failed effort to revive the global economy through the innovation of monetary arrangements and the more successful efforts in creating the Bretton Woods system. In the post-Second World War period, following a bewildering array of monetary arrangements, most EC countries have relinquished their national currencies, leading to an unprecedented form of monetary union based on a single currency.