The Challenge of Respecting WTO Goals

How might the governance challenge best be addressed? It is by now a platitude to decry the negotiated tradeoffs that characterize the WTO culture. It is a culture that saturates the organization, that pervades its operations, and that has done a great deal of damage to the cause of open trade. At its root, the notion is defensible. Whereas lowering trade barriers is by and large favorable over the medium and long term and for most players, there is often a price to be paid by some countries in the short term. This often involves selling particular economic interests short in favor of a solution that is overall better for others (such as consumers) in the short term and for all or most in the longer term. Lowering subsidies for French farmers may cause them adjustment problems, for instance, but it may also lower food prices for the consumer or boost the French service industry. Yet the immediate interests are often politically influential, so the tradeoffs that go on at the WTO serve as a political currency whereby trading partners make concessions in order to provide the political justification for the penalty imposed on the interests that lose out.

If negotiating tradeoffs is an effective way of convincing countries to make politically unpopular but economically necessary con

New Approaches to Trade Governance cessions, it is not generally a good way to serve wider goals such as equity, poverty alleviation, or environmental responsibility. In any commercial negotiation, commercial power confers negotiating advantage, so the powerful trading countries and blocs have greater negotiating power. This suggests that they will always—or almost always—prevail in a standoff with weaker parties. Further, in any negotiation involving commercial tradeoffs, the result may be more open trade, a larger economic pie, and a greater range of opportunities for traders; it will not automatically do anything to correct the inequities built into the trading system. If both sides make equal concessions, their relative position on the trading totem pole will remain the same. If the European Union is negotiating with the countries of the Southern Africa Customs Union, a successful outcome is unlikely to include a shift in the balance of commercial advantage in favor of the latter.

A second reason that wider goals are ignored relates to how trade policy is developed at the national level. Interest in maintaining a particular tariff or subsidy will be concentrated in a relatively small group of players (truckers, for instance, or dairy farmers) who will usually be well organized to defend an interest they deem crucial to their commercial success. An equally valid inter-est—for example, closing the gap between rich and poor countries, protecting the environment, or even lowering prices for the consumer—is likely to be far more dispersed and less well organized, at least in terms of affecting trade policy. Thus when national trade representatives set their negotiating priorities and parameters, the weight of immediate commercial interests will always trump less immediate or well organized concerns. So even if rapid, trade-led economic development in Central America is an essential component of any sensible strategy to limit immi gration pressure in the United States, for instance, and even if that development might best be served by giving Central America unfettered access to U.S. markets for their goods and services, in reality the partisan interests of U.S. textile workers and fruit producers will tend to prevail.

Finding the right balance among competing interests in formulating trade policy and negotiating positions is hard enough within the confines of trade concerns alone. But ensuring that trade and sustainable development are mutually supportive is considerably more difficult, since it involves the traditionally complex question of policy coherence. It is an inescapable fact that public policy is a hierarchy. Macroeconomic policy, including trade policy, travels first class, whereas the policies that relate to the environment and development travel coach—and often stand-by. The current crisis suggests that there may not be much progress on trade liberalization unless governments begin to demonstrate that they take the environment seriously.

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