Foundations of the WTO Governance Crisis

Governance crises can arise when the gap between what is declared and what is delivered grows too big. This is the case with the WTO if the text of the Preamble is taken to represent a legitimate articulation of the organization's overriding goal. The results of the Uruguay Round of trade negotiations, which ran from 1986 to 1994 and led to the establishment of the WTO, were sold hard to developing countries. While it was recognized that some countries would benefit more than others, the promoters insisted that all countries would be winners. And in recognition of the adaptation challenges they might face, developing countries were given additional time to implement the new agreements. That, it was felt, should be enough. No one accurately assessed the difficulties developing countries would face.10

It soon became evident that not only were many countries having a hard time adapting to the new requirements, some clearly felt they were losing out. It began to emerge that although trade openness could bring benefits, it tended to do so only where certain basic conditions—institutions, capacity, an efficient customs service, an independent judiciary, a solid banking system, and so on— were in place. Developing countries received scant sympathy when they sought to use WTO mechanisms to obtain help in these areas. The gap between rhetoric and reality was proving hard to bridge.

Despite this, many major trading powers felt they were on a roll and should push further. Less than two years after the WTO opened for business, the Singapore ministerial meeting in December 1996 adopted a new agreement on information technology and agreed to "study" four new topics— investment, competition policy, trade facili tation, and transparency in government pro-curement—with a view to including them in a later round of negotiations. An attempt to launch that new round collapsed in Seattle in late 1999, but two years later and with none of the developing-country concerns addressed adequately, WTO members agreed in Doha, Qatar, in November 2001 to launch a comprehensive new round of trade negotiations.11 Most developing countries went along in large part because the new round was presented as a "Development Round," with the goal of delivering a result genuinely positive for poorer countries and correcting some problems inherited from the Uruguay Round. By implication, at least, this suggested recognition of the fact that the promise of the Uruguay Round had proved hollow for many countries. As WTO Director-General Pascal Lamy told the U.N. Economic and Social Council in July 2007: "Trade opening and rule-making are indeed major goals of the WTO. But today a number of the current substantive rules of the WTO do perpetuate some bias against developing countries." He cited the rules on subsidies in agriculture, for example, which tend to favor industrial countries, along with high tariffs that many of those countries apply to agricultural and industrial imports, in particular from developing nations. "A fundamental aspect of the Doha Development Agenda," Lamy noted, "is therefore to redress the remaining imbalances in the multilateral trading system and to provide developing countries with improved market opportunities."12

More than six years after it was launched, the Doha Round has come to a standstill, and prospects for an early conclusion appear dim. While few participants question either the robust foundation of trade theory or the benefits of open, rules-based trade, several problems are increasingly evident.

Trade openness does not, on its own, bring

New Approaches to Trade Governance the benefits that trade theory suggests, as they depend on the right conditions being in place. The trading powers have until recently showed little interest in helping poor countries achieve these conditions.

Concerns for equity, environment, and development are largely incompatible with the hard-ball, mercantilist approach to trade negotiations and the culture that this approach consolidates.

Since trade policy and the trade rules shifted their principal focus from border measures to domestic policy and expanded their reach beyond trade in goods, the relationship between trade policy and public policy interests in these areas can no longer be ignored.

Developing countries are increasingly aware of their power and authority and will no longer accept promises of future benefits. They want tangible results, if not down payments in the form of up-front concessions from richer trading powers as a proof of good faith.

So where does this leave the WTO? And is the present impasse a governance crisis? In terms of transparency and access to information—two of the basic criteria of good governance—the WTO rates well, at least as far as its members are concerned. The creation of the WTO led to a massive increase in public interest in the trading system, and both formal and informal access to accurate, up-to-date information on virtually every aspect of the system's operations is now available to anyone who wishes to receive it.

Participation presents greater challenges. There is widespread agreement that the massive expansion not only of the WTO membership (over 150 countries, twice the size of GATT when the Uruguay Round was launched) but of the number and complexity of the agreements and negotiations has presented poorer countries—especially the smaller ones—with considerable difficulties. In the normal course of events, some 25 for mal meetings take place each week at WTO headquarters. But as many as 19 developing countries, for financial reasons, have no representation in Geneva at all; others have just one or two staff covering all U.N.-related events in Geneva.13

There is widespread agreement that the massive expansion of the number and complexity of the agreements and negotiations has presented poorer countries with considerable difficulties.

This is especially difficult for negotiations, since the interests of developing countries do not divide easily along North-South or regional lines or even according to any particular pattern of interests. And yet it is impossible to envisage delicate negotiation of binding and enforceable economic agreements with 150 players in the room. Some form of representational presence must be used, but it is far from clear how that might be organized. The Doha Round has seen considerable experimentation with interest groupings, with some positive impacts on transparency and inclusiveness but so far without appearing to find the magic solution. To some extent, then, the crisis of the WTO is related to the governance challenge of ensuring adequate participation of stakeholders.

This is particularly true beyond the WTO's primary constituency in the trade policy com-munity—in the wider group of stakeholders in civil society, among consumers and other groups whose interests are centrally affected by the shape and nature of the trading system. While some civil society organizations are having a clear impact on the policy debate, the level of participation and the mechanism to make constructive participation possible are far less than optimal for well-governed trade policy.

New Approaches to Trade Governance

The real challenge, however, relates to the third pillar of good governance: accountability. At one level, of course, the WTO boasts of its fine record with accountability. It is very much a member-driven organization, and each member is accountable to legislative bodies back home. The crisis relates to the WTO's track record in advancing the goals that the founders established for the system, as set out in the Preamble. There is a very real sense in the WTO community—not to mention the wider trade policy community—that the formal structures available do not guarantee accountability in terms of the objectives set for the system. And it is precisely this failure that has led governments and interested observers to question how the WTO works and how committed its most powerful members are to finding solutions compatible with the overall goal. Indeed, the WTO has no mechanism to assess fidelity to and progress toward its stated goal. (Although the WTO Committees on Environment and Development were invited to monitor the impact of Doha Round proposals on sustainable development, they have not done so.)14

An interesting and important exception is the Appellate Body, the WTO's highest "court," which rules on appeals against the findings of Dispute Settlement Panels. As noted earlier, it has invoked the WTO Preamble as evidence that the founders intended the system to support sustainable development, even if the commitment is cast in imprecise terms. It is clear that the Appellate Body has adopted a central position in ruling on the character, purpose, and direction of the system. Beyond that, however, there is little sign that WTO members collectively feel any obligation to correct past decisions that have damaged the prospects for development or the environment.15

Civil society has also played an important role in insisting that the WTO be held to account for the impact of its rules and decisions on wider public policy objectives. Although civil society has been notable for criticizing the WTO for its shortcomings and in part for opposing any progress toward further trade liberalization, it is clear that the net impact of civil society input has been to place the multilateral trading system squarely in front of its responsibility to deliver results that support sustainable development.16

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