The GATT/WTO is a quintessentially mercantilist<sup>bargaining framework where</sup> concessions to open each other's markets are exchanged.<sup>These concessions are legally</sup> binding commitments not to make policies affecting<sup>market access more restrictive than a</sup> certain stated level. Thus, a country may commit not<sup>to raise its tariffs on bananas above</sup> 20% or commit to allow at least 5 foreign banks<sup>to enter its market. It is important to</sup> recognize that actual conditions of access may<sup>be, and often are, more liberal than those</sup> which are legally bound - actual tariffs on bananas<sup>may be only 10% and more than 5</sup> foreign banks may actually be allowed to enter.<sup>Traders and investors value both the</sup> actual liberalization of markets and the legal guarantee<sup>of access.</sup> In order to see when multilateral engagement<sup>can both facilitate domestic reforms and</sup> make it possible to extract concessions from trading<sup>partners, it is useful to examine three</sup> situations.

If a country is wedded to self-sufficiency, as India and<sup>other developing countries were</sup> until recently, it cannot be a bargainer. If you are not<sup>willing to open your markets, you</sup> do not have the most obvious means of inducing your<sup>trading partners to do so. Under the</sup> so-called special and differential treatment (S&D),<sup>developing countries sought, indeed</sup> could only seek, limited preferential access as<sup>supplicants, because of their own</sup> unwillingness to liberalize, rather than genuine non-preferential<sup>access as equal partners.2</sup> Paradoxically, if a country is credibly committed<sup>to reform and can successfully</sup> implement it, it cannot be a credible bargainer either.<sup>Partner countries can basically</sup> free-ride on the internal commitment knowing that a<sup>refusal to engage in bargaining will</sup> not alter their market access interests. The situation<sup>does not change much if a reformer</sup> proceeds with liberalization unilaterally but refuses<sup>to bind the openness under the WTO</sup> in the hope of extracting concessions. This is because<sup>the value to partner countries of a</sup> binding by a credible reformer such as Singapore<sup>or Chile is small given the low</sup> probability of policy reversal.

A third situation, and one that applies to India in the current<sup>context, arises in relation to a</sup> willing reformer whose ability to implement<sup>reform is constrained by domestic</sup> opposition. in this case, domestic reform could be<sup>facilitated if a government could</sup> demonstrate that there were payoffs, in terms of increased<sup>access abroad, to domestic</sup> opening. The gainers from the increased access, be<sup>it exporters of textiles, software,</sup> professional services or other products, could represent<sup>a countervailing voice to groups</sup> (import-competing industries) resistant to reform.<sup>How effective such a strategy could be</sup> for Indian policymakers is unclear, but selling reform<sup>domestically should be that much</sup> easier if some external payoffs can be demonstrated.

China's recent agreement with the US on its accession<sup>to the WTO illustrates this</sup> political economy at work. In fact, in China's case,<sup>the external payoff, at least in the US</sup> market, is really not _increased_ access, but securing existing<sup>access as it already receives</sup> 2 Of course, this suited the protectionist interests in industrial<sup>countries because it allowed them to</sup> procrastinate on the liberalization of the two sectors where<sup>developing countries had intrinsic comparative</sup> advantage-agriculture and textiles.

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