Multilateralizing Trade and Payments in Postwar Europe

Europe's postwar shift to multilateral trade and payments arrangements was complicated by three factors. Distributional problems and uncertainty about the state of the world made European governments reluctant to adopt multilateral arrangements without financial support from the United States. An enforcement problem made U.S. policymakers reluctant to finance a European multilateral trading system. The severity of these problems was reduced by institutional designs that combined flexibility, centralization, and particular decision rules. Centralization and flexibility reduced uncertainty and softened distributive conflict. Centralization and particular decision rules solved the enforcement problem that U.S. policymakers faced.