PROTECTING ECONOMIC REFORM BY SEEKING MEMBERSHIP IN LIBERAL INTERNATIONAL ORGANIZATIONS DISSERTATION Presented in Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School at The Ohio State University By Louise M. Steen-Sprang, M.A. ***** The Ohio State University 2003 Dissertation Committee: Approved by Professor Brian M. Pollins, Adviser Professor Richard Herrmann _______________________ Adviser Professor Timothy Frye Political Science Graduate Program ABSTRACT Domestic leaders use international institutions to increase their domestic political power and protect favored policies. During economic transformation, governments can protect reform policies by seeking membership in an international organization with specific liberal membership requirements. The accession process into such an organization binds governments to reform policies and increases their ability to withstand attempts by reform opponents to weaken the reform process. Two approaches from the literature on economic transformation yield competing hypotheses predicting when governments will use the accession process to protect economic reform. The dominant J- curve approach predicts that reforming governments seek outside help during economic transformation when short-term losers threaten reform success. Short-term losers pose this threat when they are able to hold the government highly accountable to the general public, act as veto-players, or use mass uprisings against reform policies. According to the partial reform approach, reforming governments seek outside help during economic transformation when short-term winners, not losers, threaten reform success. Short-term winners pose this threat when public officials prevent reform policies from being implemented or the government is not accountable to the general populace. ii The competing hypotheses are tested using duration analysis and six comparative case studies. The results indicate that the J-curve approach explains the majority of cases when seeking occurs, but that the partial reform approach accurately explains a small subset of cases. Regardless of who reform opponents are, governments can use seeking membership in a liberal international organization to protect economic reform. More often the opponents are short-term losers, but short-term winners can also drive governments to seek external assistance during economic transformation. In this way, international organizations are a crucial tool that domestic leaders deliberately use to increase their domestic power and protect favored policies such as economic reform. iii Dedicated to my husband for his loving support and my mother and father for their endless encouragement iv ACKNOWLEDGMENTS This dissertation would not have been possible without the assistance of numerous people. I wish to thank my adviser Brian M. Pollins for his encouragement and patience during this process. Without his intellectual support, the end product would not exist today. I thank Richard Herrmann for many interesting discussions concerning various aspects of this dissertation and advice on my career. I thank Timothy Frye for suggesting the central focus of this dissertation, the J- curve and partial reform approaches. His suggestions during this process greatly assisted me in focusing my efforts. I also thank William Liddle, Richard Gunther, Marcus Kurtz, and John Mueller for their insights regarding the case studies. I am grateful to participants in the Department of Political Science at The Ohio State University RIP Series for their insights and comments. Early incarnations of this project also benefitted from the comments of Donald Sylvan. Finally, I thank my husband Ethan Sprang and son Ronan Steensprang for their patience during this lengthy process. This research was supported in part by a dissertation research grant from the Mershon Center at The Ohio State University, a grant from PEO, and a fellowship from the PEGS program in the Department of Political Science at The Ohio State University. v VITA May 23, 1976. Born - Elmhurst, Illinois 1997. B.A. Political Science, Northern Illinois University 2000. M.A. Political Science, The Ohio State University 2000 - 2001. .Editorial Associate, American Journal of Political Science 2001 - present. .Graduate Teaching and Research Associate, The Ohio State University FIELDS OF STUDY Major Field: Political Science vi TABLE OF CONTENTS Page Abstract .............................................................. ii Dedication ........................................................... iv Acknowledgments .......................................................v Vita.................................................................. vi List of Tables......................................................... viii List of Figures ......................................................... ix Chapters 1. Introduction: Why States Join IOs .....................................1 2. IOs Protect Economic Reform .......................................49 3. Statistical Findings................................................83 4. Spain And Slovakia Protect Economic Reform .........................121 5. Vietnam And Chile Protect Economic Reform .........................221 6. Conclusion.....................................................294 Appendices A. Figure.........................................................318 B. Tables.........................................................320 Bibliography .........................................................342 vii LIST OF TABLES Table Page 1: Major IOs and Liberal Membership Criteria ..........................321 2: Hypotheses and Indicators ........................................327 3: Results from a Cox Model (with the Efron method for ties) ..............328 4: Results from a Cox Model with Regional Dummy Variables (with the Efron method for ties) ..................................329 5: Results from a Cox Model with Euroreg (with the Efron method for ties) ..................................330 6: Results from a Cox Model without the Middle East (with the Efron method for ties) ..................................333 7: Results from a Cox Model without Southeast Asia (with the Efron method for ties) ..................................334 8: Results from a Cox Model without Latin America (with the Efron method for ties) ..................................335 9: Main Findings From Duration Analysis ..............................336 10: Who Posed a Threat in Spain and Slovakia? ..........................337 11: Independent Variables for Spain After Franco .........................338 12: Independent Variables for Slovakia .................................339 13: Who Posed a Threat in Vietnam and Chile? ...........................340 14: Independent Variables for Vietnam and Chile .........................341 viii LIST OF FIGURES Figure Page 1: When Economic Reforms are at Risk According to the J-Curve and Partial Reform Approaches ........................319 ix CHAPTER 1 INTRODUCTION: WHY STATES JOIN IOs During economic transformation, reforming governments face severe credibility problems that often lack domestic solutions because the structure of domestic institutions exacerbates the credibility problems. To make their commitment to economic reform more credible, government leaders can seek membership in international organizations (IOs) to bind themselves and successors to reform. This relationship between domestic reform and international solutions for domestic credibility problems is not well understood for three reasons. First, studies thus far have focused on how being a member of an IO can aid political reform in member states (Pevehouse 2000; Russett, Oneal, and Davis 1998). They do not consider whether IOs can aid economic reform, nor how IOs can play this role in potential members. To understand how the entire accession process can provide credible commitments for liberalization policies, I attempt to explain why states seek membership in IOs that severely limit their sovereignty. Second, existing work looks at how international actors aid domestic reform rather than how domestic actors can actively seek outside help to stabilize the reform process. Rather than using a top-down approach, this dissertation begins with the realization that domestic leaders can seek international mechanisms that strengthen their favored policies. Finally, the literature on economic transformation includes two opposing arguments that explain 1 when reforms will suffer credibility problems. These arguments lead to contradictory hypotheses predicting when reforming governments will need external help during economic transformation. In this dissertation, I test the two competing arguments to study when reforming governments will seek membership in IOs to protect domestic economic reform. When considering how IOs can foster domestic liberalization, most existing studies focus on democratization. While this is an important relationship, cases where only economic liberalization occurs are usually ignored. For instance, Vietnam used the ASEAN accession process to stabilize its economic reforms while maintaining strict control of the political sphere. To understand the relationship between IOs and domestic liberalization, economic reform also needs to be considered. Current studies of the relationship between IOs and domestic reforms also neglect how the accession process can aid reform. Many international policymakers posit that the process of IO membership negotiation itself