Abstract and Keywords
Of all the international organizations and regimes that were negotiated at the end of World War II, at least in fulfilling their immediate mandate, few have had as successful a record as the multilateral trade regime. Governed first by the General Agreement on Tariffs and Trade, and succeeded by the World Trade Organization (WTO), the regime has facilitated an impressive reduction in tariff and non-tariff barriers to international trade. This handbook provides a holistic understanding of what the WTO does, how it goes about fulfilling its tasks, why it has reached the point of crisis today despite having a long history of achievements behind it, and how might it contend with current and new challenges. It explores three aspects of the negotiation process: historical process, decision-making and negotiation process, and process as agency. The article also discusses the implementation and enforcement of the WTO agreements, including the trade policy review mechanism and the dispute settlement mechanism, challenges to the system, and proposals for WTO reform.
The World Trade Organization (WTO) Came into Existence in 1995, but behind its apparent youth lie over five decades of institutional history, learning, and evolution that have made the multilateral trading system what it is today. This volume grapples with this critical, complex, and controversial organization.
Of all the international organizations and regimes that were negotiated at the end of the Second World War, at least in fulfilling their immediate mandate, few have had as successful a record as the multilateral trade regime. Governed first by the General Agreement on Tariffs and Trade (GATT), and succeeded by the WTO, the regime has facilitated an impressive reduction in tariff and non-tariff barriers to international trade. The regime ensures that its members enjoy the benefits of freer trade and more open markets, access to which is negotiated on a multilateral basis. Further, they do so in a consistent and reliable manner due to the enforceable rules that underpin the multilateral trading system. This resilience of the system came to the fore most visibly in the aftermath of the global financial crisis: despite predictions of the return to the protectionism of the 1930s and all its devastating consequences, markets have remained open and trade has continued to provide a vital route of recovery.1 The demand for the regime is evident in the large and growing number of countries clamouring to become its members: the original contracting parties to the GATT numbered 23; today the WTO has 153 members, and 31 countries with observer status.2 And yet, not all is well with the organization.
The trading system, even in the days of the GATT, was subject to ill-informed attacks and accusations from the outside. The replacement of the GATT with a full-blown organization and a strengthened dispute settlement mechanism (DSM) brought the WTO even more into the public eye. But the difficulties that afflict the WTO today (p. 2) derive not just from crackpot and opinionated outsiders, but also well-meaning critics; the malaise that grips the organization now is thus more serious. Its manifestation in the early 2000s took the shape of the demand for improved processes of participation by its own members from the developing world. Despite the responsiveness of the organization to these demands, dissatisfaction and disengagement persist (and now pervade through not just its developing country members, but also the industrialized countries). Their most visible symptom can be found in the deadlocks that have marred the negotiations of its Doha Development Agenda (the first round of trade negotiations to be launched since the creation of the WTO in 2001 was due for completion in 2005; almost a decade after its launch, agreement is proving elusive).3 Repeatedly missed deadlines not only delay the significant gains to be had from agreement, but also undermine the credibility of the organization. Disengaged politicians turn to less efficient but easier bilateral and regional alternatives, which reinforces the disengagement with the WTO.
The purpose of this handbook is to provide a holistic understanding of what the WTO does, how it goes about fulfilling its tasks, why it has reached the point of crisis today despite having a long history of achievements behind it, and how might it contend with current and new challenges. To effectively address the key academic and policy debates that surround the WTO, an interdisciplinary perspective is indispensable. The editorial team thus comprises a political scientist, a historian, and an economist; our distinguished and international team of authors includes political scientists, historians, economists, lawyers, and practitioners working in the area of multilateral trade.
Our interdisciplinary approach is complemented by our explicit attempt to bring together a diversity of perspectives on the WTO. Some of us are more committed to the cause of free trade than others; for some, issues of distributive justice are central, while others are more engaged with questions of efficiency and feasibility; we are all cautiously sanguine, but in different degrees, about the possibility of institutional reform. We believe that this pluralism is one of the strengths of the book: it allows us a more comprehensive understanding of the politics of the WTO where an even bigger diversity of approaches is bubbling away, and it ensures that the volume brings together the cutting-edge and leading research in the field irrespective of the personal ideological leanings of authors.
The result of our collective endeavours is this volume, which we believe provides an authoritative reference point for all those interested in working in and around the specific organization, as well as others interested more generally in multilateral economic institutions. All the chapters present original and state-of-the-art research material. They critically engage with existing academic and policy debates, and also contribute to the evolution of the field by setting the agenda for current and future WTO studies. All (p. 3) the chapters also include extensive bibliographies that will be indispensable for the reader wishing to follow up on any of the key issues addressed.
We have divided the subject matter of this handbook into an introduction followed by 34 chapters, which are categorized under nine parts. The driving logic of the nine parts stems from five fundamental puzzles: the theory behind the institution (Part I), negotiation of the agreements (Parts II, III, and IV), the substance of the agreements (Part V), implementation and enforcement (Part VI), and reform of the system (Parts VII, VIII, and IX). What follows below is a brief outline of this logic and the puzzles that underlie it. Section 2 of this introduction offers a brief overview of the chapters. Section 3 concludes with a summary of the major themes that emerge from the collection.
1 The Driving Puzzle
The case in favour of free trade is theoretically clear and empirically rich.4 We know that, bar a few exceptions, trade liberalization is a welfare-maximizing pursuit. But the benefits from free trade do not lie in the material sphere or ‘universal opulence’ alone. For over three centuries, classical–liberal economists have been pointing to the pacifying effects of trade. The cataclysmic costs of ignoring this wisdom were illustrated most visibly in the interwar years, when the beggar-thy-neighbour policies across nations worsened the Great Depression and set the stage for the Second World War. The hard lessons of rampant protectionism struck deep, and leading negotiators of the post-war economic system displayed an explicit recognition of the wide-ranging costs that illiberal trade policies could yield. Henry Morgenthau (the US Secretary for the Treasury), for instance, at the opening of the Bretton Woods conference, declaimed the following conviction:
All of us have seen the great economic tragedy of our time. We saw the worldwide depression of the 1930s. We saw currency disorders develop and spread from land to land, destroying the basis for international trade and international investment and even international faith. In their wake, we saw unemployment and wretchedness—idle tools, wasted wealth. We saw their victims fall prey, in places, to demagogues and dictators. We saw bewilderment and bitterness become the breeders of fascism, and, finally, of war.5
The imperatives that guided politicians and policymakers seeking to resurrect the war-torn economic system in 1944 of course differed significantly from the imperatives that guided their successors in 1994. But particularly striking in the Agreement Establishing the WTO, too, is (a) the continued commitment to trade liberalization, and (b) the recognition that free trade is not an end in itself but a means towards achieving a (p. 4) multiplicity of goals. These goals include and go beyond the economic realm, ranging from ‘raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of, and trade in, goods and services’, to ‘sustainable development’ and ensuring that ‘developing countries… secure a share in the growth in international trade commensurate with the needs of their economic development’. Importantly, the WTO does not attempt to secure all these aspirations directly; its action is firmly focused in the domain of trade governance. It thus expresses the commitment of members to achieve these several noble objectives via ‘the substantial reduction of tariffs and other barriers to trade’ and resolves ‘to develop an integrated, more viable and durable multilateral trading system’.6 Given the historical experience and also the epistemic consensus, neither the trade-specific objectives of the WTO, nor the more general aspirations that they aim to secure via freer trade, should be controversial. That they provoke extreme passions nonetheless can be explained by five sets of issues that can serve as roadblocks on the pathway of good intentions: (1) caveats regarding the theory; (2) controversies over process; (3) contestation over substance; (4) issues of implementation and enforcement; and (5) contested directions of reform (that overlap somewhat with the first four sets of problems, but also include additional issues).
1.1 Rider to the Theory
The intuition behind the argument in favour of free trade is beautiful and simple. Specialization on the basis of comparative (rather than absolute) advantage allows for the gains from trade. In fact, as classical liberal economists have pointed out convincingly and repeatedly, bar a few exceptions, the gains from trade accrue to any country that lowers trade barriers, irrespective of what other countries do. Paul Krugman was not far off the mark when he claimed, ‘If economists ruled the world, there would be no need for a World Trade Organization.’7 But the world is not ruled by economists, and convincing theory is difficult to translate into practice for at least two reasons.
First, while trade liberalization almost always improves aggregate national welfare, it also produces winners and losers within societies. And not all the winners and losers are equally well organized or equally able to articulate their interests into policy. Producer interests that stand to lose from market opening, for example, tend to be more concentrated, better organized, and more vocal than the consumer interests that stand to win from the process. States that have more articulate exporter interests and consumer interests are likely to face an easier task selling liberalization at home, as are also states that have effective compensation mechanisms that can secure buy-in from potential losers. But effectively, much depends on the domestic configurations of interests: the promise (p. 5) of significant collective gains from free trade may remain unfulfilled if better organized, small-group, protectionist interests carry more influence in policy. Herein lies the first important deterrent to the exploitation of the gains from free trade: the economist proposes, the politician disposes.
Related to the above are the several domestic bottlenecks that can prevent the translation of the gains from trade among large groups (thereby creating a backlash against trade liberalization). Examples of such bottlenecks include high levels of corruption that render compensation schemes ineffective, and low levels of education and poor infrastructural facilities that disallow labour mobility. International trade agreements (such as those governed by the WTO) become the easy scapegoats for failures of public policy.
Second, while the aggregate benefits of free trade for states per se are clear, trade policy does not operate in a vacuum. Governments, even if cognizant of the benefits of lowering their barriers to trade, may attach greater and more immediate priority to alternative or competing goals such as self-sufficiency in a dangerous political context abroad (or deeply embedded historical concerns such as national food security), or full employment in hard times at home. Further, to be effective, free trade policies need to be balanced by complementary policies in related areas: the trade-creating effects of low tariffs can, for example, be countered by currency manipulation. Depending on the policy trade-offs that governments are willing to make, free trade might win—but it also might not.
1.2 The Process of Freeing up Trade
There are several routes to achieving the goal of international cooperation on multilateral trade, and some are more effective than others. We are directly concerned in this handbook with three aspects of the negotiation process: historical process, decision-making and negotiation process, and process as agency.
Attention to the historical process whereby multilateral trade negotiations have been conducted takes us into the heart of institutional evolution. Through an examination of the failed negotiations of the International Trade Organization (ITO), the eight successful trade rounds of the GATT, and the establishment of the WTO, we can find some important continuities and changes that explain the anachronisms and inconsistencies that the organization faces today.
The history of the GATT also holds the key to understanding peculiarities of decision-making and negotiation processes in the WTO. The WTO stands out in the universe of the international organizations as being a ‘member-driven’ organization, where the members themselves are responsible for all decision-making (rather than an executive board or a secretariat to which such powers might be delegated). Even today, despite the wide reach and enforceability of its mandate, its Secretariat remains quite small when compared to other international organizations. The reason for this lies in the roots of the WTO in the GATT. As the GATT was not a proper organization, it was unable to create its own secretariat; the solution that was resolved through (p. 6) the continued existence of the Interim Commission for the International Trade Organization (even after the ITO negotiations had failed) which provided the basis for the GATT Secretariat.8
Another particularly interesting example is consensus-based decision-making. The text of GATT 1947 accorded each contracting party one vote, and Article XXV:4 stated that, except when specified otherwise, all decisions would be arrived at through a majority vote. In practice, however, the norm of decision-making in the GATT was consensus, which acquired formal recognition in the Agreement Establishing the WTO (Article IX:1).9 The practice of consensus diplomacy worked well in the days of the GATT, when most decisions were arrived at through consultations among the ‘Quad’ (the EU, US, Canada and Japan), and when the rest of the contracting parties were willing to stand on the margins in return for a free ride on concessions exchanged among the major players. It has, however, proven to be a considerably less effective method of decision-making in the WTO, where even the core group of countries is much more diverse than the old Quad, and even smaller players recognize the importance of exercising their voice over rules that have the potential to be strictly enforced.
This brings us to the third aspect of process, which is agency. Quad-dominated diplomacy was one of the reasons why developing countries would refer to the GATT as the ‘Rich Man's Club’. Changes—both in terms of balance of power, and ideas of development and fairness—have resulted in a dramatic change in the main actors in the WTO. The old Quad has been replaced in the Doha negotiations by permutations of a new core group that has consistently included Brazil, India, and China, besides the EU and the US. Nor are the voices of the emerging markets the only new voices in key WTO processes. Particularly after the collapse of the Seattle Ministerial, and amidst a changing normative context internationally (that attaches increasing importance to development concerns, such as the Millennium Development Goals), the WTO has addressed many of the criticisms that it had encountered over marginalization of smaller developing countries. As a result of these institutional changes, as well as their own initiatives, many of the smaller players—including the least-developed countries (LDCs)—have come to exercise an unprecedented agency in the organization. And developing countries—ranging from the rising powers of Brazil, India, and China (BICs),10 to the LDCs—have had their agency in the WTO further reinforced through the coalitions that they operate in. These are very important and positive developments, especially for those traditionally concerned with the democratic deficit of international organizations. But they come at a cost.
Increasing multipolarity at the core of the organization (which comes hand in hand with not just a larger number of powerful players, but players at differing levels of development and visions of development) improves fairness of process. But its coexistence (p. 7) with GATT-derived decision-making and negotiation approaches (e.g. consensus, single undertaking) also means that the organization is much less efficient in arriving at decisions, and is more prone to the recurrence of deadlock.11 A study of the different aspects of the WTO's process—historical and current—is essential to explaining the institutional evolution of the organization thus far, and also exploring directions for reform.
1.3 The Substance of the Agreements
If the process underpinning the workings of the WTO has proven conflict prone, the substance of its agreements has been no less controversial. Dating back to the ITO negotiations, states have fought hard over what is covered by the rules, and how the rules themselves are framed. The distributive consequences of these rules can be profound in their own right, and are even more so in a system driven primarily by a mercantilist logic (where acquiring market access is seen as a win, but opening up one's own market is seen as a ‘concession’). While the content and implications of the main agreements are explored in specific chapters in the handbook, we highlight below a broad set of problems in the area of substance and their impact on institutional evolution.
The success of the early rounds of the GATT lay in the fact that its coverage was limited to the area of tariffs and trade in goods (in contrast to the ITO, which had sought to cover a much bigger terrain that included employment, development, restrictive business practices, and commodities). But the GATT, in later years, and the WTO today, are in some ways victims of these past successes. As tariffs fell, both the GATT and the WTO had to go into more difficult areas of negotiation. The GATT began its foray into addressing non-tariff barriers (or behind-the-border measures) in the Kennedy Round; the Uruguay Round saw its agenda expand beyond the traditional domain of goods to include the ‘new issues’ of trade in services, Trade-Related Aspects of Intellectual Property Rights (TRIPS), and Agreement on Trade-Related Investment Measures (TRIMs). The conflict over what was included in the GATT, and what was excluded, was fought along North–South lines. Developing countries repeatedly pointed to the exclusion of areas in which their comparative advantage lay (such as textiles and agriculture), and the inclusion of areas that were of advantage to the North (such as TRIPS). They also resented the increasing intrusiveness of some GATT rules, which usually involved requirements for developing countries to bring their own standards (e.g. on customs valuation, or Sanitary and Phytosanitary standards) in line with those of the developed countries. The dissatisfaction of the developing countries with the substance of the Uruguay Round agreements heightened their expectations and also increased their distrust.12
The WTO is in even more difficult terrain than the GATT was in the Uruguay Round. When the Doha Development Agenda (DDA) was launched, it promised to be the most ambitious of all trade rounds negotiated in the multilateral trade regime. Even the more streamlined DDA is proving to be a challenge though. Having already bound their tariffs (p. 8) on industrial goods, members must now agree to reduce the ‘water in the tariffs’, with developed countries anxious to secure real tariff cuts and market access in the emerging economies. Agriculture—the bête noire of the GATT—can no longer be brushed under the carpet with exceptions, with developing countries particularly enraged by the agricultural protectionism of the EU and the US. Progress in services negotiations (an area where potential gains are still high) has been slow, partly due to the request–offer negotiation method. The focus on development, while essential to bringing the developing world on board, has muddied the waters further in at least two serious ways. First, and unlike a precise and quantifiable commitment to lowering tariff barriers, the commitment to development is vague and subject to many different interpretations. This strategy of deliberate vagueness in framing can work well in securing buy-in in the agenda-setting stage, but as trade negotiators are learning the hard way, it can allow expectations to snowball in many different and even incompatible directions, and thereby make it harder to reach an agreement. Second, the focus on development may have contributed to the misperception in the developed economies—and particularly business groups within them—that the round is based on charity (not reciprocity) and offers them little gains. The vital domestic support for trade liberalization in the developed world, which was vital in the launch of the Uruguay Round, is missing in the case of the DDA.
The above examples are instances of the difficulties associated with negotiating the substance of WTO agreements, even if members are agreed upon the broad issue. And in many instances, even agreeing on the broader agenda can be difficult—recall, for instance, the furore over the inclusion of services, TRIPS, and TRIMs in the Uruguay Round, and the Singapore Issues in the DDA. Trade liberalization may be a welfare-maximizing pursuit, but there is nothing automatic or obvious in the prioritization of issue areas or the rules whereby market opening is facilitated.
1.4 Implementation and Enforcement
As a member-driven organization, the WTO places the onus of implementing and enforcing its agreements on the members themselves. But it does provide strengthened mechanisms that members can use in this process in the form of a strengthened Trade Policy Review Mechanism and a much more powerful Dispute Settlement Mechanism (DSM). The far-reaching automaticity and enforceability of the WTO's DSM is one reason why advocates of non-trade concerns (ranging from labour standards and human rights, to environment, sustainable development and climate change) are so keen to have these issues included within the mandate of the WTO. Members of the WTO are certainly much more inclined to use the DSM than they were in the GATT: since the founding of the WTO to April 2011, 427 dispute cases have been brought to the DSM, in contrast to just 101 panel reports that were adopted by the DSB in the entire life of the GATT. Several important concerns remain, however. The major ones are highlighted below.
(p. 9) First, even though the number of developing countries (particularly the BICs) using the DSM has increased, litigation remains an expensive and technical business that many weaker developing countries are ill-equipped to take on. This is reflected in the figures: the most frequent users of the DSM are the US and the EU, which appear as complainants in 97 and 83 cases respectively; Brazil and India have the highest usage amongst developing country members, with 25 and 19 cases brought to the DSM as complainants; LDCs appear sparsely, and mainly as third party litigants (with the exception of Bangladesh, which brought a case in 2004 as complainant). Second, if a ruling goes in a country's favour, and the respondent fails to comply, the complainant is granted the right to retaliate. But this method of enforcement sometimes acts as a deterrent to smaller countries, which can seldom hope to impact the economies of a much larger respondent. Third, the logic of the enforcement mechanism—retaliation—is inherently trade-distorting. This is in keeping with the aforementioned mercantilism underpinning the system, but makes little sense from a trade-liberalizing perspective as retaliation thus undertaken is welfare-reducing for the complainant too. Fourth, the WTO faces an imbalance in that its relatively efficient DSM is not matched by equal efficiency in the organization's negotiation function. The temptation for countries to litigate the way out of deadlock is high, when they are unable to reach the solutions they desire via the negotiation process.13 This raises some fundamental questions that go to the heart of what the functions of the WTO are, and how it can and should go about fulfilling them. It also raises implications for power distributions within the WTO: especially from the perspective of developing countries, whose effective use of the negotiation process is quite recent, potential forum-shifting from the General Council to the Dispute Settlement Body would be quite detrimental.
1.5 Contested Directions for Reform
The impressive record of the WTO in fostering multilateral trade liberalization (in good times and bad) notwithstanding, the organization faces several new challenges. The fifth and final set of problems driving this handbook relates to the practical and normative challenges that the WTO faces, and takes us into an examination of the directions of institutional reform.
The problem of institutional reform derives from several sources. In part, as mentioned earlier, the WTO is a victim of its own success: its impressive record in addressing issues such as the binding of tariffs necessarily brings it into the more contested and controversial areas (such as agriculture). On process too, it is one of the few international organizations to adapt so readily to the changing balance of power and also evolving norms of greater inclusiveness and transparency. But here too, this adaptability has generated costs that include declining efficiency, and also declining support from almost all its constituencies. The main challenge lies in finding appropriate reform measures that (p. 10) can harness and strengthen the very significant progress that the institution has made, while countering some of the unintended costs that this progress has generated. It is not our task in this handbook to recommend a particular set of policies. But we do see it very much within our collective mandate to analyse the leading research in this area, and comment on comparative strengths, weaknesses, and overall workability of various proposals. We believe that such an analysis is a timely and urgent step not only in WTO studies, but one that bears relevance for other institutions of global economic governance.
2 Outline of the Book
The book is divided into nine parts, which fit within the five puzzles identified in the previous section (see Table 1, which highlights the structure of the book). A brief outline of each of the nine parts follows.
Table 1 Book outline
Puzzle 1 Riders to the Theory
Part I Theory of Multilateral Trade Liberalization
1 The Case for a Multilateral Trade Organization (Baldwin)
2 The Inconsistent Quartet (Daunton)
3 Trade Liberalization and Domestic Politics (Goldstein)
Puzzle 2 Process: Challenges and Opportunities
Part II Institutional Evolution: Building up the WTO
4 The International Trade Organization (Toye)
5 The Expanding Mandate of the GATT (Zeiler)
6 The Uruguay Round Negotiations and the Creation of the WTO (Preeg)
Part III Process Behind the Workings of the WTO
7 The Role of the Director-General and the Secretariat (Blackhurst)
8 Defining the Borders of the WTO Agenda (Jansen)
9 Bargaining Coalitions in the WTO (Narlikar)
Part IV Agency in the WTO
10 The Influence of the EU (Messerlin)
11 The Role of the US (Allee)
12 The Role of the BRICS in the WTO (Vickers)
13 Least-Developed Countries in the WTO (Priyadarshi and Rahman)
14 NGOs and Social Movements at the WTO (Steffek)
15 Corporations and Organized Labour in the WTO (McGuire)
Puzzle 3 Substance of the Agreements
Part V Substance of the Agreements
16 Trade in Manufactures and Agricultural Products (Coskeran, Kim, and Narlikar)
17 Trade in Services (Adlung)
18 Trade-Related Intellectual Property Rights (Maskus)
19 Flexibilities, Rules, and Trade Remedies (Finger)
20 Regulatory Measures (Howse)
Puzzle 4 Enforcement
Part VI Implementation and Enforcement
21 The Trade Policy Review Mechanism (Laird and Valdés)
22 Dispute Settlement Mechanism (Bernauer, Elsig, and Pauwelyn)
23 The Appellate Body (Matsushita)
24 Interpretation and Institutional Choice (Shaffer and Trachtman)
25 Ensuring Compliance? (Sykes)
Puzzle 5 Institutional Reform
Part VII Challenges to the System
26 Persistent Deadlock (Elsig and Dupont)
27 The Role of Domestic Courts in the Implementation of WTO Law (Cottier)
28 Preferential Trading Arrangements (Baldwin)
29 Food, Agriculture, and Natural Resources (Josling)
Part VIII Normative Issues
30 Fairness in the WTO Trading System (Brown and Stern)
31 Labour Standards and Human Rights (Brown)
32 Trade and the Environment (Hufbauer and Fickling)
Part IX Reform of the WTO
33 Proposals for WTO Reform (Hoekman)
34 The WTO and Institutional (In)Coherence (Bernstein and Hannah)
Part I: Theory of Multilateral Trade Liberalization
Part I corresponds with Puzzle 1, and comprises three chapters. Chapter 1, by Robert Baldwin, presents us with an eloquent case for the GATT and the WTO by highlighting their successful empirical record in achieving trade liberalization. He also engages with theories of political economy to explain why countries need to form trade agreements at all (and why they do not commit readily to unilateral trade liberalization, despite the promise of its benefits). Having a multilateral basis to trade liberalization helps countries overcome the risks associated with unilateral market opening. But the path to free trade never does run smooth, and as Martin Daunton argues persuasively in Chapter 2, (p. 12) trade is only one of several competing goals that governments pursue. He expands the discussion of the ‘trilemma’ to focus on the ‘Inconsistent Quartet’ to highlight the trade-offs that have to be made between trade, exchange rates, capital controls, and domestic monetary policy. He further gives us historical examples and engages with current problems to shed new light on the conditions in which free trade triumphed over some of these other goals, and lost out in others. Chapter 3, by Judith Goldstein, analyses the domestic constraints on trade liberalization. Using the lens of economic interests, political institutions, and ideas, Goldstein demonstrates the constraining effects of domestic politics, particularly in democratic societies. She also explains how these constraints were overcome, and liberalization made more politically stable, with the help of the rules and norms of the GATT, and identifies new dangers to further liberalization that are rooted in the legalization of the multilateral trading regime of the WTO.
Part II: Institutional Evolution: Building up the WTO
While three parts of the handbook (II, III, and IV) deal with Puzzle 2—i.e. the evolution and impact of process—Part II focuses on the historical processes of the failed ITO and the more successful GATT, which hold the key to understanding many institutional peculiarities of the WTO.
In Chapter 4, Richard Toye presents an analysis of the unsuccessful attempt to create the ITO, and carefully traces the negotiation processes that contributed to this failure. Interestingly, in the conclusion, he engages in counterfactual analysis to argue, ‘the ITO might have produced a more inclusive, productive, orderly and just world economy than that which in fact emerged’. This argument, in fact, also points towards one of the sources of the successes of the GATT—its lower ambition and comparatively weaker enforceability allowed for a successful negotiation in the first instance, while its de facto functioning as a ‘Rich Man's Club’—for all its problems—did contribute to its sustained efficiency.
Chapter 5, by Thomas Zeiler, focuses on the first seven rounds of GATT, and presents a fascinating account of the reasons and (often fraught) processes whereby the mandate of the GATT expanded, and also why it took the particular directions that it did. Inherent in this expansion were also several problems, all of which contributed to the search for a solution that would eventually take the shape of the WTO. Several of the issues that Zeiler raises are picked up by the following chapter.
Chapter 6, by Ernest Preeg, studies the Uruguay Round—a round with a deeper and wider reach than all previous rounds, and the round that also led to the creation of the WTO. Preeg presents a lively analysis of the controversies that dogged the Uruguay Round each step of the way. He also examines the processes that led to the creation of the WTO. Preeg's analysis of the distinctive characteristics of the WTO and his brief overview of the expanse of its agreements (along with the previous two chapters, which highlight the difficulties that former trade negotiators had faced in their pursuit of a fully fledged organization) provide an indication of just how momentous an achievement the (p. 13) creation of the WTO was. His final note is sombre, however, where he analyses the problems associated with the altered balance of power in the WTO, the rise of regionalism, and the persistence of what he calls the ‘irrational dichotomy between developed and developing economies’. Variants of these themes recur in several chapters of the book.
Part III: Process Behind the Workings of the WTO
This group of chapters focuses on the processes that underlie the everyday functioning of the WTO. It comprises three chapters, which focus on the role of the Director-General and Secretariat, the process of agenda-setting, and the role of coalitions respectively.
The role of the Director-General and the Secretariat forms the focus of Chapter 7 by Richard Blackhurst. Blackhurst provides a valuable overview of the WTO's relatively small bureaucracy, and its roots in the GATT. Interestingly, altered circumstances in the WTO—expanded membership, expanded agenda, a strengthened DSM, behind-the-border reach of its rules (and into domestic regulations and values), and the rise of developing countries—have been accompanied by a diminished role for the Secretariat. Blackhurst identifies this trend as almost inevitable, and examines proposals for reform. His conclusion, however, is that the Secretariat has consistently and successfully acted as the ‘guardian’ of the system for at least three decades, and that the direction for reform should lie elsewhere.
Chapter 8, by Marion Jansen, addresses the process of agenda-setting in the WTO. Defining the borders of the regime was, and remains, a deeply contested issue, and particularly controversial is the link between trade liberalization and behind-the-border measures. As Jansen rightly points out, the 2008–9 financial crisis demonstrated that strong liberalization in a weak regulatory environment can lead to global economic instability. But encroaching into the domestic regulatory environment of states can be sensitive: not only are domestic regulations often embedded in a particular cultural heritage, but changes to the regulatory status quo also generate costs. After providing us with the rationale for linking domestic regulations to trade negotiations, she traces the process whereby the trade agenda has expanded in the GATT and the WTO. Note that this chapter offers particularly useful background for Part V on the substance of the agreements.
The focus of Chapter 9 is the role of coalitions in the institutional processes of the WTO. Amrita Narlikar argues here that while bargaining coalitions, especially of developing countries, are first and foremost agents of the power that stems from collective agency (and hence the link between this chapter and the actor-focused chapters in Part IV), they have come to acquire a vital role in the WTO's decision-making and negotiation processes. Narlikar traces the changing rationale and structure of coalitions, from the Uruguay Round to the DDA, and also investigates the bargaining strategies that the DDA coalitions have used, both to preserve unity among their own members, and also in dealing with the outside parties. These strategies have contributed to the emergence of ‘strong’ coalitions, which have become an integral part of the negotiation and (p. 14) decision-making process, and which are, as a result, more inclusive than ever before. But as Narlikar argues, according such a role to coalitions is not without problems: the most serious is their contribution to the making of an organization that is more deadlock-prone and conflict-ridden. The final section of the chapter offers possible solutions.
It is worth mentioning that the fourth factor that underpins the everyday workings of the WTO is the decision-making process. We chose not to have a separate chapter on this aspect of process in Part III of the volume because other chapters (within Part II, as well as Chapter 9) discuss this issue in the context of the institutional evolution of the organization. Chapter 33, by Bernard Hoekman, (in Part IX on Institutional Reform) further provides a succinct analysis of decision-making in the WTO before discussing proposals for reforming this, and could be read just as easily in tandem with Part III as a part of Part IX.
Part IV: Agency in the WTO
The member-driven nature of the WTO means that we must pay considerable attention to key players in the process, and the changing imperatives driving them. This part of the volume focuses on both state and non-state agency in the organization. Our country-specific chapters cover the EU and the US (both members of the former Quad and all permutations of the new Quad), the BICs (as the rising powers in the world trading system), and the LDCs (as among the weakest players in the trading system, but still providing us with instances of growing voice and influence). Part IV also includes two chapters on the non-state actors that have attempted, with varying degrees of success, to influence the workings of the organization: business and organized labour groups on the one hand, and non-governmental organization (NGOs) and social movements on the other. While this part of the volume studies the central players in the WTO from a process perspective, these actors and their interests reappear in several other chapters of this volume.
Chapter 10, by Patrick Messerlin, studies the influence of the European Union as an actor in the WTO. Messerlin starts off with an important observation: the EU's influence in the GATT and the WTO has been quite different from that of other powers (such as the US). The uniqueness of its influence derives from the particular tools that it evolved—and continues to evolve—to facilitate its integration process. Further, this influence varies according to issue areas. For instance, Messerlin points out that the EU's influence is particularly visible in some of the more difficult areas, such as Technical Barriers to Trade, and the relatively newer areas, such as services, which the EU has already tackled successfully for its internal market. Of course, not all such strategies translate effectively at the multilateral level; Messerlin highlights examples where the EU's experience has been useful for trade liberalization in the WTO, and others where it has been less relevant.
Todd Allee, in Chapter 11, systematically analyses the changing role of the United States in the WTO system. The ambivalence of the US towards the system was reflected (p. 15) even at the time of the ITO negotiations: the US can in good measure be blamed for scuppering the Havana Charter through its failure to ratify it, and yet it played a vital role in the creation and maintenance of the GATT. Indeed, as Allee rightly points out, the US provided leadership and support for the GATT system for the first 30 years, but its role in the last 30 years of the regime has become ‘more complicated and at times more contentious’. Allee's multi-causal analysis for decline in US support towards the regime includes three factors: (a) the decline in US hegemony; (b) the role of ideas, and particularly the change in the ‘free trade mentality’ to one that focuses more on the ‘unfair practices’ of other nations; and (c) the role of domestic interest groups, and particularly the increasing effectiveness of import-competing interests.
The focus of Chapter 12, by Brendan Vickers, is on the rising powers of Brazil, India, and China. All three, while still presenting themselves as members of the developing world, have come to acquire an unprecedented influence in the WTO. Their rise offers several new opportunities for the trading system, but also poses serious and unanticipated challenges. Vickers offers us two compelling reasons for studying the WTO diplomacy of the BICs: economically, the three have captured large shares of global trade, and politically, their growing voice in the WTO is reshaping at least some of the rules of the game. After a brief overview of the trade policies of the BICs, the chapter investigates the impact of the rising powers on the WTO along three fronts: rule-making, rule-enforcement, and coalitions. Vickers is careful to distinguish between the behaviours of Brazil, India, and China on all three fronts, while also highlighting some important similarities. And while all three show greater activism in the organization, activism does not equate with leadership.
Chapter 13, by Shishir Priyadarshi and Taufiqur Rahman, focuses on the least developed countries in the WTO. In some ways, this group forms the opposite end of the spectrum of the developing world from the BICs: neither do the LDCs enjoy remotely comparable market shares to the BICs, nor do they occupy a comparable position of importance in the key processes of the WTO. Priyadarshi and Rahman provide a brief overview of the trade profiles of the LDCs, and the constraints that they face in the trading system. But as the rest of the chapter demonstrates, the LDC story in the WTO is one that offers us cause for at least cautious optimism for two reasons. First, the WTO system has several flexibilities and other provisions that apply to the LDCs, and the attempts of the Doha negotiations to go even further to integrate them more effectively into the system through provisions like duty-free and quota-free market access and Aid for Trade. Second, the LDCs themselves have shown considerable initiative and agency through collective bargaining and building alliances with other developing countries. Even though the LDCs have not managed to acquire the clout that some of their counterparts from the developing world have, Priyadarshi and Rahman give a convincing account of their increasing empowerment in the WTO.
In Chapter 14, Jens Steffek analyses the role of NGOs and social movements in the WTO. After providing a theoretical overview that outlines the rationale for NGO involvement in intergovernmental organizations, Steffek traces the role of the NGOs in the multilateral trading system from a historical perspective. The GATT offered little (p. 16) scope for NGO involvement, but the WTO accorded some recognition to NGOs through a vague reference to the possibility for consultation by the General Council in the Marrakesh Agreement. This relationship was clarified through the 1996 guidelines on arrangements for relations with NGOs. Though the WTO offered more engagement with NGOs than the GATT, they still had no place in the ‘inner sanctum’ of its decision-making. Following criticism regarding its lack of transparency (criticism that was especially vociferous at the time of the Seattle Ministerial in 1999), the WTO has taken several other measures to improve participation through representation and information access. Steffek acknowledges these ‘incremental’ (rather than ‘revolutionary’) steps towards opening the organization to non-state actors, examines which NGOs have secured access to the WTO, and also traces their achievements. In his conclusion, he cautions against overplaying the direct impact that NGOs have had on policy decisions, even though they have had some successes in placing issues on the agenda and triggering public debate.
Chapter 15, by Steven McGuire, addresses the fundamental problem of the declining voice of business interests and organized labour in the WTO. Domestic interests, which form the subject of McGuire's study, are traditionally seen as a deterrent to trade liberalization (as argued by Goldstein in Chapter 3, and further illustrated by Allee in Chapter 11). Interestingly, however, the lack of engagement by domestic interests is now often cited as a cause for deadlock in the Doha negotiations. McGuire explains the causes of this disengagement in terms of the oft-ignored heterogeneity of corporate actors. He argues that for corporate actors, the broad sweep of the negotiations and the numerous non-state actors from civil society make it difficult to keep the negotiations focused on the technical aspects of business regulation. Regional trade agreements and the DSM offer more opportunity than the Doha negotiation process. Further, organized labour groups—with their agenda for labour standards—find their position weakened by the rise of the emerging markets (which see this set of demands as a form of protectionism). And the contribution of trade to poverty alleviation has blunted the case of labour activists in developing countries.
Part V: Substance of the Agreements
All the chapters in Part V relate to Puzzle 3 about the content of the agreements, how this was negotiated, and what kinds of distributive implications these agreements generate.
Chapter 16, by Helen Coskeran, Dan Kim, and Amrita Narlikar, examines the negotiations on non-agricultural market access and agriculture, in the past and the DDA. Both areas, as the authors point out, belong to the conventional area of goods, i.e. familiar terrain even for the GATT. And yet, these are also the two issues over which the DDA negotiations have repeatedly broken down. Coskeran, Kim, and Narlikar address two puzzles in the chapter: (a) why, after a very successful record of bringing down trade barriers in the previous rounds, have the NAMA negotiators faced repeated deadlock in the DDA? And (b) how far are the difficulties in the agricultural negotiations a continuation of the (p. 17) problems that previous rounds encountered, or are they a product of interests and processes specific to the DDA? The chapter presents a historical account of the negotiations in each area before examining the problems of the DDA. The authors illustrate how traditional methods that negotiators use to break deadlock—such as issue linkage, Chair's texts, variations in formulae to facilitate an acceptable distribution of costs—have all failed to deliver a compromise in the DDA. They attribute these difficulties to two fundamental causes. First, the difficulties encountered in NAMA and agriculture are a reflection of the more general problems of the WTO that derive from the altered balance of power (see also Chapter 6 by Preeg, Chapter 9 by Narlikar, and Chapter 12 by Vickers). Second, the ambition of the DDA negotiations in these areas is deeper than any of the previous rounds, and automatically takes negotiators into much more difficult terrain.
Rudolf Adlung, in Chapter 17, explores trade in services. In contrast to NAMA and agriculture, for example, services is a relatively new area for the multilateral trading system, and Adlung notes that the General Agreement on Trade in Services (GATS) is a young and incomplete agreement. Moreover, market access offers in the Doha Round compare poorly against the autonomous moves towards liberalization taken on by members. Adlung explores the reasons for this, and further analyses why, notwithstanding the poor substance of offers under GATS, a lot has happened in terms of liberalization at the ground level. In doing so, the chapter also takes into account the implications of services liberalization as part of Bilateral Investment Treaties and preferential trade agreements (PTAs). While services PTAs might be less trade distorting than their counterparts in merchandise trade, Adlung identifies several important costs that they generate in the form of their ‘GATS-minus’ commitments, as well as the deflection of resources away from the multilateral process. The chapter also raises broader questions of policy coherence within countries and at the multilateral levels, and as such resonates with Chapter 28 on regionalism and Chapter 34 on the coherence of trade within the broad area of global economic governance.
Chapter 18 by Keith Maskus examines the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Maskus starts off by identifying TRIPS as the most important agreement on intellectual property for three reasons: its comprehensive nature, its near-universal reach, and its enforceability via the DSM. After providing an overview of the principles and major requirements of TRIPS, the chapter also analyses the flexibilities allowed by the agreement and its application under the DSM through a discussion of landmark cases. The chapter is particularly effective in bringing out the different political interests and processes that underpin the agreement, and how they contribute to current controversies and negotiations in the DDA.
In Chapter 19, Michael Finger provides us with an analysis of the flexibilities, rules, and trade remedies that form a part of the WTO agreements. Provisions such as safeguards and anti-dumping are important in that they provide governments the necessary flexibilities to deal with internal pressures and still maintain a generally liberal trade policy. While acknowledging their benefits, however, Finger argues that they are ‘an embarrassment to both legal and economic theory’: the discipline that the system applies is more about fewer restrictions than good restrictions versus bad. Rather than simply a (p. 18) description of such provisions, the chapter analyses their evolving usage. The chapter calls for ‘analytic reform’ rather than just ‘policy reform’ of the trade remedy system, which includes a closer attention to the national institutions that manage trade remedies.
Chapter 20, by Robert Howse, focuses on the issue of regulatory measures in the WTO (and thereby also addresses some of the issues that are raised in Chapter 8). Howse gets to the heart of one of the key problems: it is extremely difficult to distinguish between measures that are a legitimate exercise of domestic regulatory autonomy from others that may be seen as a form of protectionism. Even in the early years of the regime, when the reach of the GATT behind the borders was minimal, Howse points to the difficulties associated with determining impermissible versus permissible discrimination, without reference to some standards. The chapter then goes on to address agreements that deal with these concerns, including the Agreements on Sanitary and Phytosanitary Measures, Technical Barriers to Trade, and GATS. Finally, the chapter investigates the implications that the WTO's regulatory measures generate for the organization's democratic deficit (thereby linking up with several of the issues raised in Part IX of the handbook).
Part VI: Implementation and Enforcement
While the previous chapters deal broadly with issues of rule-making, all the chapters in Part VI examine the implementation and enforcement of the rules and norms of the WTO. The focus here is particularly on the Trade Policy Review Mechanism (TPRM) and the Dispute Settlement Mechanism (DSM).
While the WTO's DSM has attracted much attention, this is not the only mechanism available in the organization's toolbox to implement and enforce its rules. Chapter 21, by Sam Laird and Raymundo Valdés, highlights the purpose, main features, functioning, and limitations of the TPRM. This ‘transparency mechanism’ is not a part of the enforcement process of the WTO, but the information that it provides can be used to assess compliance; as such, its role is particularly important in a member-driven organization, besides the fact that efforts to enhance transparency go back to the creation of the regime. The chapter traces the evolution of the TPRM, from the ad hoc surveillance schemes of the GATT in its early years, to its establishment on a provisional basis in 1989, and institutionalization on a permanent footing with the creation of the WTO. Laird and Valdés carefully trace the workings of the TPRM, and also highlight the results of various appraisal procedures. The achievements of the TPRM are significant, which include the creation of an extensive resource base on trade policies. But as the chapter explains, it also faces challenges, including demands on it to fulfil a technical assistance role. At least some of the challenges relate to the capacity and limited resources of the Secretariat (also see Chapter 7 by Blackhurst).
The focus of Chapter 22, by Thomas Bernauer, Manfred Elsig, and Joost Pauwelyn, is on the DSM. After a brief overview of the workings of the DSM, the greater part of the (p. 19) chapter offers an analytic and interdisciplinary literature review. The authors address major conceptual and theoretical issues associated with the DSM, including the fundamental question of why international trade agreements need dispute settlement provisions, and what shape might they take. They further provide an overview of scholarship on major questions on the WTO's DSM, such as legalization, dispute initiation, and third party litigation. Finally, they address gaps in the literature, thereby setting an agenda for future work in the field.
Chapter 23, by Mitsuo Matsushita, studies the role of the Appellate Body in the WTO. If members are not satisfied with the rulings of the dispute settlement panel, they can appeal to the Appellate Body, which reviews the panel reports, and can uphold, modify, and reverse them. Matsushita provides an overview of the major principles of WTO jurisprudence that have been established by the Appellate Body. This jurisprudential role of the Appellate Body has proven to be controversial (see also, Chapter 22). The chapter addresses two sets of critiques: for some the Appellate Body has been too literal in its interpretations, whereas for others the Appellate Body has overstepped its mandate by going beyond interpretation and into rule-making. Matsushita explains that though these two criticisms seem to contradict each other, in fact they address different functions of the Appellate Body. Finally, the chapter addresses possible directions for reform.
In Chapter 24, Gregory Shaffer and Joel Trachtman provide an analytic framework for describing and assessing the consequences of choices in treaty interpretation. They do so by referring to examples from WTO case law. The chapter assesses interpretive decisions by examining how they allocate authority between different social decision-making processes. Focusing on the welfare and participatory implications of these choices, the authors offer two important conclusions. First, these choices impact upon social decision-making in terms of transparency, accountability, and legitimacy. Second, the choice of institutional alternatives—such as incorporation of international standards, judicial balancing, delegation to markets, national deference, and process-based review—can determine which social decision-making process decides a particular policy issue, thereby affecting the institutional mediation of individual preferences.
Alan Sykes, in Chapter 25, investigates the extent to which the purpose of the DSM is to ‘ensure compliance’. The answer is less straightforward than it would appear to be at first glance. While all scholars agree that one purpose of the DSM is to encourage compliance with WTO obligations at least some of the time, Sykes points to differing views on whether the system is meant to facilitate efficient breach (and hence the limits of retaliation) or if it is meant to rebalance concessions following breach of obligations. The chapter, after providing a brief historical overview, takes us to the heart of the legal debate on the purpose of the DSM, and explains how it allows members the option to violate WTO obligations for a measured ‘price’ that is tied to the harm done by the violation to the complainants. Sykes argues that the logic of the system can be best understood ‘as a way to facilitate efficient adjustment of the bargain over time’.
(p. 20) Part VII: Challenges to the System
The final set of puzzles addressed in the volume has to do with the challenges to the system, and possible directions of institutional reform that incorporate both practical and normative concerns. Part VII deals specifically with the practical challenges to the system, which include the problem of recurrent deadlock, the call by certain interests to expand the reach of the WTO into new and non-trade issues (and thus related to Part V) and also the role of domestic courts in implementing WTO commitments.
Chapter 26, by Manfred Elsig and Cédric Dupont, traces and explains the recurrent deadlock in the Doha negotiations. They identify four structural/contextual factors—ideas, institutions, interests, and information—as necessary for understanding and anticipating potential deadlocks. They further incorporate the intervening variable of behavioural choices by actors to explain deadlocks, using a simple game theoretic model to outline the logic of their argument. The chapter concludes by outlining two general scenarios for the DDA, and discusses their implications for the WTO.
In Chapter 27, Thomas Cottier addresses the complex problem of the domestic–international interface in implementing the obligations of the WTO. Specifically, he examines the role of domestic courts in assessing claims brought to them on the basis of WTO law. In doing so, he addresses the vital question of how far a domestic court can enforce international law, and further produce compliance from its legislative and executive branches. Other relevant questions include the comparative effectiveness of WTO law in different jurisdictions. Cottier demonstrates that traditional doctrines of dualism and monism in international law no longer provide an adequate framework in dealing with WTO law. Based upon the premise of the unity of all law, he argues in favour of the development of a doctrine in the process of dialogue and interaction of courts which may eventually also find its way into explicit principles and rules within the WTO.
Chapter 28, by Richard Baldwin, addresses the issue of regionalism. Several other chapters in the volume also touch upon the dangers that the turn to preferential trading arrangements poses for the multilateral trading regime. Baldwin systematically unpacks the political economy of regionalism. He distinguishes between the twentieth century regionalism—which dealt primarily with tariff preferences—and the twenty-first century regionalism that deals with the new disciplines that underpin the deeper and more complex patterns of commerce today. His analysis points to a serious risk: ‘regionalism is creating new rules governing international commerce, including international trade. These are being decided outside of the WTO in a setting of massive power asymmetries and without basic principles of non-discrimination and reciprocity in concessions.’ The resulting challenge for the WTO is either to multilateralize some of the deeper disciplines, or somehow retain its vibrancy within the narrower mandate that was set for it with the signing of the Uruguay Round agreements in 1994.
Chapter 29, by Tim Josling, addresses one of the emerging challenges for the WTO, and focuses on the nexus between food, agriculture, and natural resources. In food (p. 21) trade, he identifies a vital need for rules that reflect the globalization of food systems, including the emergence of private food standards, and the possible updating of the Sanitary and Phytosanitary Measures (SPS) Agreement. Agriculture raises questions about the appropriateness of current trade rules as a backdrop for investments in agriculture, food production, and marketing in developing countries. In the area of natural resources, the development of rules on government ownership, or investment in land and other resources in other countries, could become an issue. And extending to several areas of primary products’ trade is the need to strengthen the rules that constrain the use of export restrictions and taxes when commodity prices are high. The chapter further explores some of the specific considerations in each that would have to be negotiated, often related to environmental and social factors. As Josling argues, together these issues offer an opportunity to complete the integration of developing countries into the WTO agenda, though much will depend on the shape that these rules end up taking.
Part VIII: Normative Issues
The issue of fairness in trade has attracted many interpretations and controversies. In Chapter 30, Andrew Brown and Robert Stern unpack the concept of fairness. They provide a brief critique of the utilitarian principle as a guide to fairness in the world trading system. They then offer an alternative conception of fairness in terms of economic equity. In doing so, they focus on two of its components: equality of opportunity and distributive justice, and further specify the conditions of autonomy and reciprocity that have to be met to achieve greater fairness in multilateral trade negotiations. The authors also comment on aspects of procedural justice that are necessary for the functioning of a fair trading system. They substantiate this normative analysis through an assessment of fairness considerations achieved in the Uruguay Round and the implications that they generate for the conclusion of the DDA.
Chapter 31, by Drusilla Brown, addresses the deeply divisive issue of the links between international trade, and human rights and labour standards. As she points out, the integration of global markets in goods and service, facilitated first by the GATT and then the WTO, has been correlated with a decline in poverty, and a general improvement in the status of women and children. But as cases of poor labour standards and human rights violations also abound, activists have argued for the establishment of international labour standards linked to market access within the WTO to remedy some of the gross violations of human rights that can accompany international trade. After providing a brief historical overview of the scant provisions on this subject in the multilateral trade regime, and the theoretical case for such standards, Brown systematically analyses seven labour standard categories, the link between globalization and human rights violations, and the market inefficiency or inequity that a standard would remedy. Finally, the chapter investigates and assesses the implementation of labour standards in practice, focusing particularly on the Generalized System of Preferences and the Better Factories Cambodia initiative.
(p. 22) Chapter 32 is the final chapter in Part VIII, where Gary Hufbauer and Meera Fickling examine the relationship between international trade and environmental concerns in the context of the WTO. This is another controversial area for the WTO, and one that has often been afflicted by serious North–South divisions. The authors highlight some of the key provisions of the WTO that relate to environmental concerns, and further discuss proposals that have been made whereby the WTO could deal with this issue more effectively. Particularly interesting are the chapter's proposals on eliminating tariffs on environmental goods, and also addressing the issue of environmentally harmful subsidies. The chapter also addresses the issue of climate change, and investigates how far it can and should be dealt with in the WTO. The authors offer a ‘Code of Good Practice’ among the major emitting countries to guide their trade-related climate change measures, and also touch upon the trade implications of geoengineering.
Part IX: Reform of the WTO
The final part of this volume deals with the question of how the WTO might be reformed. Chapter 33, by Bernard Hoekman, is a perfect complement to the issues addressed in Part III, and should ideally be read in parallel with the other chapters on process. In this chapter, Hoekman provides an overview of the modus operandi of the WTO (e.g. decision-making procedures, negotiating modalities, and dispute settlement), and also summarizes the major arguments and proposals to reform them. Hoekman rightly points out that much has already been done to improve the internal and external transparency of World Trade Organization processes. He offers a constructive critique of key proposals: for instance, he argues that some proposals for structural reform ignore incentive constraints and the fact that the World Trade Organization is an incomplete contract that must be self-enforcing. Others—such as calls for a ‘critical mass’ approach to negotiations—can be pursued (and have been). The agenda for international cooperation increasingly revolves around ‘behind-the-border’ regulatory externalities that do not necessarily lend themselves to binding commitments in a trade agreement. He makes the case for a focus on strengthening notification/surveillance and developing more effective mechanisms for dialogue on regulatory policies that sometimes create negative spillovers.
In Chapter 34, Steven Bernstein and Erin Hannah explore institutional cooperation in global economic governance to address two fundamental questions: (a) where do the rules of the WTO overlap or compete with those of other institutions and (b) what explains institutional coherence/incoherence between the WTO and other international organizations? Bernstein and Hannah explore the relationship of the WTO with different institutions and over different issue areas, ranging from finance and aid, to intellectual property rights, and environmental and social regulations. In doing so, they touch upon and further develop some of the mandate-related concerns that were raised in Chapters 2, 8, and also chapters 16–20. They argue that in certain areas, which parties have directly targeted to facilitate trade liberalization (e.g. intellectual property rights, (p. 23) finance, and aid), the WTO has a regulatory role to play in cooperation with other relevant institutions. But in areas such as social and environmental regulation, where ‘the goal of regulation is to “embed” economic governance in broader societal goals’, they argue that coherence would be best achieved if states ensured that WTO rules continued to leave space for a global division of labour and allowed alternative institutions to do the regulating.
As the previous section illustrates, the 34 chapters in this volume cover a wide range of topics. All the authors, despite some differences in their disciplinary backgrounds and normative starting points, acknowledge the achievements of the WTO. The regime has played a key instrumental role in facilitating trade liberalization, and thereby provided the global economy with the foundations for economic growth, prosperity, and overall stability since the end of the Second World War. It has ensured the evolution of a rules-based system to govern multilateral trade, which has proven resilient to the onslaught of global economic crises. It is true that even the WTO's most ardent supporters would find it difficult to claim that it has managed to achieve the ideal levels of participation or the optimal outcomes for the world's poorest countries and people. But no fair assessment of the WTO could ignore the quantum leap that it has made (from the days of the GATT, and indeed in comparison to most other international organizations) in ensuring greater inclusiveness and prioritizing development. All the chapters in this volume, in one way or another, recognize these achievements.
That said, the volume also highlights many of the problems that the WTO faces today. Obvious symptoms of the problems are the recurrence of deadlock in the Doha negotiations, and the proliferation of regional and bilateral alternatives. Many of the chapters keep an eye on these issues as they address some of the bigger debates. At least four major themes emerge from the collective analysis, which offer an agenda for future research and also implications for the policy world.
First, freer trade is a necessary—but not sufficient—condition for equitable growth. Especially when growth is unevenly distributed within countries, trade is seldom the culprit, but it does make an easy scapegoat. To avoid misallocation of blame, and indeed ensure the necessary support for the system, it is extremely important that trade governance takes place in cooperation with other economic (and indeed social) goals, with a clear and identifiable allocation of responsibilities. Intellectually, this requires more empirical studies at the domestic level that identify the policy trade-offs that governments make, and how they justify them to their publics. This needs to be accompanied by analyses at the international level on the available and prospective tools for greater coherence in global economic governance.
Second, many of the controversies of the GATT—and indeed current ones at the WTO—have to do with the mandate of the organization. Here opinion is divided among (p. 24) scholars on how the reach of the organization should be defined, not only over behind-the-border measures, but in several new areas such as climate change. While the WTO will need to move with the changing imperatives of trade, any proposed expansion in its agenda needs to be justified theoretically and conceptually. A close eye also needs to be kept on feasibility: the WTO is arguably already overstretched through its expansion into trade-related aspects of development, while its Secretariat and resources have not expanded comparably. Several of the chapters in this volume suggest ways in which the WTO's agenda can be defined and limited, such that it remains in step with the organization's structures and capabilities but also works hand in hand with other institutions and regimes of global governance.
Third, the handbook illustrates both the efficiencies and flaws of the processes of the WTO, and in doing so, also provides an indication of the normative balancing act that previous, current, and indeed any future reform measures, must entail. As several of the chapters demonstrate, the WTO today is a considerably more inclusive and transparent organization, at least as far as its members are concerned. But the unintended cost of ensuring fairness of process has been a decline in the efficiency of its functioning, and hence also the multiple problems of deadlock, regionalism, and rule-making through litigation that ensue.
Finally, all the chapters are cognizant of the political bargains that underpin the WTO. These are reflected in the domestic political economy of trade liberalization, the historical failures and successes that eventually led to the formation of the WTO, the negotiation and decision-making processes at the organization, and indeed in the substance of the agreements. They even appear in the most legalized arm of the organization—the DSM—which for all practical purposes encourages rather than enforces compliance. This allows us some editorial satisfaction at least in our initial intuition on the relevance of interdisciplinarity for this project. It also suggests that both theorists and policymakers would be well served to learn from cognate disciplines as they seek to analyse and reform the WTO.
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(2) Acquiring ‘observer status’ is not an empty commitment: with the exception of the Holy See, all governments are required to start negotiating their accession within five years of acquiring their observer status.
(3) An example of the ferocity of debate in the trade policy circles on the possibility and implications of Doha crashing can be found on 〈http://groups.google.com/group/cuts-tradeforum〉 accessed on 15 April 2011.
(9) Consensus is reached if no member ‘formally objects to the proposed decision’.
(10) Note that the ‘R’ is missing from the acronym; the reason why we refer to the BICs rather than the BRICs is because Russia became a member of the WTO only in December 2011. It is too early to analyse or predict its behaviour in the organization as a full member.